Could The Philippines Predict Our Next Decade?

Summary

The video script explores the Philippines' unique economic journey, highlighting its rapid growth amidst challenges. Despite being resource-rich but economically lagging, the country leverages its people and strategic location for business and outsourcing, aiming to rival advanced Asian economies. However, it faces internal corruption, political instability, and external pressures from US-China relations. The script also examines the potential impact of technological advancements on its industries and the need to upscale to avoid obsolescence.

Takeaways

• 🌏 The Philippines is an overlooked country with one of the fastest-growing economies, achieving growth differently from regional peers like Thailand, Vietnam, and China.
• 🏞️ Despite having significant natural resources, the country's wealth comes from leveraging its people as well as its resources, setting it on a path to become an advanced Asian economy.
• 📈 The Philippines' economic growth is driven by its strategic positioning in Southeast Asia, becoming a hub for business and operations as China's become more complex.
• 🔄 The country faces numerous challenges including geopolitical tensions, corruption, political instability, and extreme inequality, which could hinder its progress.
• 🇺🇸 The Philippines has a complex relationship with the USA, which has historically influenced its economy and infrastructure, but also complicates its geopolitical stance.
• 💼 Major global companies like Accenture choose the Philippines for outsourcing due to its English-speaking, Western-educated workforce and strong regulatory practices.
• 🚧 The country's island geography presents both advantages and challenges, influencing its focus on white-collar services over manufacturing and contributing to a large trade deficit.
• 🛠️ The Philippines has a promising shipbuilding industry, focusing on smaller vessels that align with its domestic needs and global market demands.
• 🔊 Corruption is deeply entrenched in the Philippines, impacting economic growth and deterring both domestic and foreign investment.
• 🌐 The country's tech sector focuses on mid-tier operations, providing basic components for a wide range of products, capitalizing on its position in the global market.
• 🏙️ Inequality in the Philippines is stark, with a concentration of wealth and development in Manila, while remote areas lag behind, affecting social mobility and talent distribution.

Q & A

What makes the Philippines an interesting country despite its economic challenges?

The Philippines is interesting due to its rapid economic growth, unique geographical, political, and cultural factors, and its potential to become one of Asia's most advanced economies by leveraging its people and natural resources.

How does the Philippines differ from other major economies in the region in terms of economic growth?

The Philippines is growing rapidly but differently from other major economies like Thailand, Vietnam, and China, focusing on leveraging its human resources along with its natural resources, rather than just exploiting the latter.

What are some of the challenges the Philippines faces in its path to prosperity?

Challenges include internal issues like corruption, an uncertain political landscape, and severe inequality, as well as external pressures such as its role as a middleman between the USA and China and the potential irrelevance of its industries due to technological advancements.

How has the Philippines' relationship with the USA influenced its economy and infrastructure?

The USA's colonial history and ongoing military and economic support have significantly influenced the Philippines' infrastructure, with investments in hospitals, roads, and bridges, and have made English the dominant language in governance and business.

What is the significance of the Treaty of Manila in the context of the Philippines-US relationship?

The Treaty of Manila, signed on July 4th, 1946, marked the Philippines' independence from the USA, yet the two countries' political and economic interests remain intertwined, affecting each other's geopolitical and economic situations.

Why has Accenture, a global professional services company, targeted the Philippines for its operations?

Accenture has targeted the Philippines due to its unique geographical and political position, cultural history, and the high-quality, low-cost workforce that can connect with Western clients effectively and offer dependable services.

What advantages does the Philippines have over other Asian countries in terms of outsourcing?

The Philippines offers advantages such as a Western-educated workforce, high standards and regulatory practices, and cultural familiarity that make it a preferable destination for outsourcing over other Asian countries with potential security and IP theft concerns.

How does the Philippines' geography impact its industrial capabilities and economic strategy?

Being a series of islands with limited land mass restricts the Philippines' industrial capabilities, particularly in manufacturing and transportation. However, this has led the country to focus on white-collar services and industries like shipbuilding and technology sectors that align with its geography.

What is the current state of the Philippines' trade balance, and what are its implications for the economy?

The Philippines imports significantly more than it exports, resulting in a trade deficit of around 57 billion dollars annually. This highlights the need for the country to find more reliable ways to close the trade gap and stabilize its economy.

How does corruption in the Philippines affect its economic growth and the willingness of investors?

Corruption in the Philippines is deeply entrenched and affects economic growth by deterring domestic and foreign investment, misusing public spending, and creating an environment of uncertainty that is unattractive to investors.

What is the potential impact of AI on the Philippines' outsourcing industry, and how could it affect the country's economic stability?

AI is predicted to significantly impact sectors such as back-office work, customer service, call centers, and logistics management—key areas of the Philippines' outsourcing industry. This could threaten economic stability if the country does not upscale its industries and adapt to technological advancements.

How does the Philippines rank in terms of GDP and GDP per capita, and what does this indicate about its economic status?

The Philippines has a GDP of 471 billion dollars, ranking it as the 32nd largest economy globally. However, with a GDP per capita of just 4130 dollars, it indicates a large population with a relatively low average income, suggesting economic challenges despite overall growth.

What are the implications of the Philippines' inequality and how does it affect social mobility and the labor market?

Inequality in the Philippines is inherent in its geography and exacerbated by governance issues. This leads to a lack of opportunities for talented workers in impoverished areas, limited social mobility, and a brain drain as skilled individuals leave the country for better prospects.

Outlines

00:00

🌏 Economic Growth and Challenges of the Philippines

The Philippines is experiencing rapid economic growth, standing out in the Southeast Asian region with a unique approach compared to neighbors like Thailand and China. Despite a large population living in poverty with an output below the global average, the country is rich in natural resources. However, it faces significant challenges, including corruption, political instability, and inequality. The Philippines is leveraging its people and resources to become a business and manufacturing hub, especially as operations become more complex in China. Yet, it must navigate its position between the USA and China and address internal issues to sustain its progress.

05:01

🤝 The Philippines' Complex Relationship with the USA

The Philippines' relationship with the USA is deeply rooted in history, beginning with the US taking over from Spanish rule in 1898. The US has significantly contributed to the Philippines' infrastructure and economy, but this has also created a dependency. The country's political and economic interests are closely linked with the USA, affecting its stance in territorial disputes and business relations with neighbors. The US military presence and investments indirectly aid the Philippines' economy, but also complicate its geopolitical identity. The relationship is further complicated by the Philippines' need to assert its sovereignty while benefiting from US support.

10:04

📈 The Outsourcing Boom and Economic Identity of the Philippines

The Philippines has become a major hub for outsourcing, particularly benefiting from its cultural history and Western influence, which allows its workforce to connect with Western clients effectively. Companies like Accenture have chosen the Philippines for its skilled, low-cost labor, and reliable regulatory practices. Despite competition from countries like China, Thailand, and India, the Philippines offers a unique advantage due to its English-speaking workforce and cultural compatibility with Western businesses. However, the country's reliance on outsourcing also makes it vulnerable to technological advancements that could disrupt these industries.

15:05

🛠️ The Philippines' Industrial Stagnation and Trade Gap

The Philippines' unique geography as a series of islands presents both advantages and challenges for its economy. While it has capitalized on white-collar services due to limited land for manufacturing, its trade deficit remains a significant issue. Shipbuilding and technology sectors focus on smaller, less competitive markets, providing a stable yet unspectacular growth. Corruption, political instability, and a lack of industry diversification pose risks to the country's economic stability. The potential for investment from President Ferdinand Marcos Jr offers hope for improvement, but also raises concerns about exacerbating existing inequality.

🏙️ Urban Sprawl and Socioeconomic Disparities in the Philippines

The Philippines faces significant urban challenges, with Manila's rapid expansion leading to poor living conditions and a lack of basic amenities. This, coupled with socioeconomic disparities, drives talented workers away and contributes to a brain drain. The country's economic growth is at risk of being undermined by the inability to provide adequate living standards and opportunities for social mobility, especially as technological advancements threaten the outsourcing sector, which is a key part of the economy.

📊 The Philippines on the Economics Explained Leaderboard

In terms of economic ranking, the Philippines holds the 32nd position globally with a GDP of $471 billion. However, its GDP per capita is significantly lower than the global average, reflecting the large population's uneven distribution of wealth. While the country has shown strong growth, its stability and confidence are hindered by corruption and political issues. The Philippines' industry is characterized by a middle-of-the-road approach, with no world-leading sectors but a robust presence in several mid-tier industries. The potential impact of AI and a reliance on foreign transfers pose challenges to its economic future.

Keywords

💡Economic Growth

Economic growth refers to the increase in the production of goods and services of an economy over a period of time. In the video, the Philippines is highlighted as having one of the fastest growing economies, which is a central theme. The script discusses how this growth is being achieved differently from other countries in the region, emphasizing the unique path the Philippines is taking.

💡Natural Resources

Natural resources are materials and elements found in nature that are valuable to humans and the economy. The video mentions that the Philippines has some of the greatest natural resource endowments in the region, suggesting that these resources could potentially be a significant factor in the country's economic development, yet it also points out that exploiting them alone is not sufficient for wealth creation.

💡Outsourcing

Outsourcing is the practice of contracting work to an external company or individual rather than performing it in-house. The script describes the Philippines as a major hub for outsourcing, particularly in industries like call centers and back-office work, which is a key driver of the country's economic growth and ties to global businesses.

💡Inequality

Inequality refers to the uneven distribution of resources, opportunities, or income within a population. The video discusses the crushing form of inequality present in the Philippines, which is a significant challenge for the country. It is mentioned as a factor that could potentially undermine the progress made by the economic growth.

💡Geopolitical Interests

Geopolitical interests are the strategic and political concerns that influence a country's foreign policy and international relations. The script talks about the Philippines' position as a middleman between the USA and China, highlighting the complex geopolitical situation that affects the country's economic and political stability.

💡Infrastructure

Infrastructure refers to the basic physical and organizational structures needed for the operation of a society or enterprise. The video mentions the US investments in the Philippines' infrastructure during the colonial period, which was crucial for the country's development and its role as a competitive trading hub.

💡Cultural Heritage

Cultural heritage encompasses the traditions, values, and historical artifacts that shape a society's identity. The script notes the impact of American influence on the Philippines' cultural heritage, particularly through the education system and language, which has implications for the country's national identity and its relationship with the US.

💡Manufacturing

Manufacturing is the process of transforming raw materials into finished goods through industrial processes. The video points out that the Philippines' limited landmass and infrastructure constraints have made manufacturing a less significant part of its economy compared to services, which is a key aspect of the country's economic profile.

💡Brain Drain

Brain drain is the emigration of highly trained or intelligent people from a particular country. The script discusses the Philippines' acute brain drain problem, where talented workers leave the country for better opportunities, which is a challenge for the nation's economic development and social mobility.

💡Corruption

Corruption is the dishonest or fraudulent conduct by those in power, typically involving bribery or manipulation. The video describes corruption in the Philippines as deeply entrenched, affecting economic growth and public trust, and creating an environment that is not conducive to business or political stability.

💡Technology Sector

The technology sector encompasses industries related to the development, production, and distribution of technological goods and services. The script mentions the Philippines' focus on the production of basic microchips, which is part of the country's strategy to capitalize on its workforce's skills in mid-tier operations within the global tech industry.

Highlights

The Philippines is experiencing one of the fastest growing economies in history, with unique factors setting it apart from regional peers.

Despite having a large population and significant natural resources, the Philippines faces challenges due to its overall low economic output and inequality.

The country's geography, political history, and culture contribute to its rapid economic catch-up, potentially positioning it alongside advanced Asian economies.

Leveraging its people is key to the Philippines' economic strategy, complementing its natural resources.

The Philippines serves as a stable business hub in a divided Southeast Asian region, taking on operations too complex for China.

Internal and external challenges, including its geopolitical role between the USA and China, corruption, and political uncertainty, threaten the Philippines' progress.

Technological advancements pose a risk to the Philippines' most promising industries, potentially rendering them obsolete.

The unique relationship between the Philippines and the USA, rooted in colonial history, influences the country's economic and political landscape.

US investments in infrastructure and the adoption of American values have shaped the Philippines' development.

The Philippines' sovereignty is tested by its reliance on the USA for economic stimulation and geopolitical protection.

Accenture, a major global employer, has targeted the Philippines for its outsourcing industry due to cultural and historical ties with the West.

Filipino workers offer a unique advantage in Western-oriented fields such as back office work and call centers, setting the country apart from competitors.

The Philippines' Western education system and regulatory practices make it a reliable partner for outsourcing, despite security concerns in other countries.

Geographical constraints limit the Philippines' industrial capacity but also focus its economy on white-collar services.

The country's trade deficit and reliance on imports present economic challenges that require innovative solutions.

Shipbuilding and technology sectors, focusing on mid-tier operations, have been significant drivers of the Philippines' economic growth.

Corruption is deeply entrenched in the Philippines, impacting economic growth and investor confidence.

Political instability and the risk of corruption deter both domestic and foreign investment, hindering the country's economic advancement.

President Ferdinand Marcos Jr's plans for a $100 billion investment could transform the Philippines into a manufacturing and logistic hub.

Inequality in the Philippines is both a geographical and governance issue, affecting the distribution of wealth and opportunities.

The Philippines faces a race against time to advance economically before being made irrelevant by new technologies, particularly in its outsourcing sector.

The Philippines' economic performance is evaluated on the Economics Explained Leaderboard, reflecting its middle-of-the-road status.

Transcripts

The Philippines is one of the most interesting and overlooked countries in the world.

It's currently home to one of the fastest growing economies in history and it's achieving

this very differently from other major plays in the region like Thailand, Vietnam and of course

China. This collection of islands is home to 115 million people which currently make up an

overall very poor population with an output roughly a third of the global average, which is

especially disappointing considering that the country has some of the greatest natural resource

endowments in the region. But exploiting natural resources alone is not enough to make a country

rich and in many cases it can work against it which is why the Philippines is so interesting.

Some strange quirks of the nation's geography, political history and culture mean that the

country is catching up rapidly and it's doing it in a way that could make it one of the most

advanced economies in Asia right in line with Taiwan, South Korea and Japan. It's doing this by

leveraging its people as much as the resources it can dig out of the dirt. As the Southeast Asian

region becomes more divided the Philippines is becoming a stable and friendly enough country to

do a lot of business, make a lot of products and accommodate a lot of operations that are

becoming too complicated to do in China. Of course that doesn't mean that the country has a clear

path to prosperity. It has a very long list of challenges both internal and external not least

of which is the fact that it's both physically and metaphorically acting as a middleman between

the USA and China. Beyond that ongoing issues like corruption and uncertain political landscape and one

of the most crushing forms of inequality a country can have are all immediate challenges that will

need to be addressed. It's a lot and that's before considering that the country's most

promising industry may be rendered completely irrelevant by technological developments happening

right now. So what has fueled the Philippines' intense economic growth? Are these industries

truly going to be sustainable in the coming decades? And finally what are the challenges that could

undo that progress? Once we have done all that we can put the Philippines on the economics

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time on all your writing today. To say the Philippines has a unique relationship with the

USA would be quite the understatement. As much as the US stimulates the Philippines economy and has

provided vital infrastructure, this dependency also opens the East Asian islands up to numerous

complications. It started with its colonial history when the USA took over from Spanish rule in 1898.

Uprising throughout the Philippines against Spanish rules became embroiled in the European

country's war with the USA and the end result was the Spaniards releasing the colonies to them

in exchange for $20 million at not completely insignificant sum at the time. Despite cries to

Filipino independence and resisting guerrilla fighters, the US ultimately voted in favour of

using the archipelago as a foothold into Asian trade. That wasn't the explicit reason given at the

time but let's be honest it's clearly a driving factor. However to be a competitive trading hub

it required significant investments into infrastructure. This was the turn of the 20th

century when economic prosperity more than ever was been determined by mechanisation and modern

infrastructure to support industries beyond just agriculture. Sponsorship from the US military

began installing hospitals, renovating roads and funding bridges. One city to see a big overhaul

was the capital of Manila. As the first few decades of the 20th century passed America moulded the

Philippines into its image. English became the dominant language especially in governance and

business and the education system was overhauled to instill American values even if it potentially

came at the cost of its own cultural heritage. Now of course the USA wasn't doing this out of the

kindness of their heart. Even back then they saw the strategic importance of these islands which

made them a worthy investment even if they couldn't claim them forever. After World War II the US and

the Philippines signed the Treaty of Manila on July 4th 1946 whereby the Philippines became an

independent republic. Sharing its day of independence with its former ruler perhaps ironically sums up

how dependent the Philippines actually is on US support. Even to this day the Philippines'

political and economic interests are intertwined with the USA whether they really like it or not.

There is the hotly contested territorial dispute with China over the dominion of the

South China Sea and Japanese business investments have forged a strategic partnership with the

Philippine government. This naturally means that any tensions between the Philippines and its

neighbors or business partners are felt by the USA and vice versa. If the US has economic disputes

with China like trade routes in the South China Sea for example then it will also play out in

Philippine markets and boardrooms. If Japanese investors try to broker a new deal with the

archipelago then the US will be on hand to intervene at the behest of their former colonies

interests or their own. Yet the Philippines is a sovereign state so it's expected to incur its own

hardships with its own economy. This places the country in a precarious situation where on one hand

they rely on the US both to stimulate its economy and protect its geopolitical interests while also

showing that it's not an American lapdog. That's a tricky identity to navigate when the US personnel

stationed in military bases contribute significantly to local business and commerce. Currently just

500 US military personnel are based in the Philippines but there are more bases due to be

built in the new future and the US pays handsomely for this foothold. Once the cost for salaries and

benefits of Americans stationed overseas are factored in then this practically becomes a form

of indirect foreign aid because the US is indirectly sending money to the Philippines through their

troops. Clearly the Philippines has a complicated relationship with the United States of America

at all levels of its economy. The big question is whether this entanglement is a gift or a curse

especially when the Philippines is used as a major hub for outsourcing including by one of the world's

biggest employers that most people have never heard of. It's called Accenture and it's a

self-described US multinational headquartered in Dublin for reasons obviously not tax related.

According to Fortune magazine its revenues in 2023 were an impressive 64.1 billion dollars and

that's thanks to having 91 of the Fortune Global 100 companies amongst its client base. The company

has 733,000 employees with officers and operations in more than 200 cities across 49 countries where

it serves clients in more than 120 economies around the world. A big part of the company's

operations are simple professional services provided by low-cost employees from countries

where labor is much cheaper than the advanced economies it works for. Accenture has targeted

the Philippines because of the nation's unique physical and political position but above all

else its cultural history. For starters Filipino workers are far more than just low-cost laborers.

There are knowledge based fields on offer like back office work, call centers and even creative

fields like basic marketing and design. Such diverse opportunities help businesses find the

most optimal cost-saving structure so even if they're not manufacturers looking to fill

overseas factories with cheap assembly workers there's a lot of heavy lifting that can be done

for them at a far lower cost in the Philippines. The likes of Amazon American Express, Apple,

Google and even Wells Fargo firmly integrate the Philippines into their business structure.

That means tens of billions of dollars have been generated thanks to the low-cost workforce of this

country but the question is why? There are plenty of other more competitive countries within a

stone's throw like China, Thailand and even India which has more English speakers than the

Philippines has people yet major global companies still choose here. The answer is simple but

unintuitive. Decades of Western education, cultural influence and work training means

Filipinas can connect with Western clients in ways other Asian workers might not be able to.

The high standards and regulatory practices also make them far more dependable meanwhile

the lower costs of labor outcompetes the workers from Western countries with similar features

plus there are the security concerns. Western companies are more inclined to hand over sensitive

documents to a censure or any other firm operating within the area than with their Chinese counterparts.

Even India, another outsourcing hub has had enough scandals and leaks within recent years

to lose credibility in the eyes of potential business partners. In 2019 the telecommunications

company T-Mobile sued Chinese manufacturer Huawei for stealing its technology through an

Indian subcontractor. According to the US Department of Justice report Huawei offered bonuses to workers

to steal confidential information for companies around the world and was even indicted for wire

fraud and obstruction of justice. That same year also saw Wipro one of the largest IT companies

in all of India fall victim to a devastating data breach. Allegedly a nation state actor accessed

their systems months before they realized their service had been compromised and it's not just

private businesses having issues like these. States and public bodies are regretting outsourcing

their tactile or funded projects. The state of Nebraska sued Wipro for failing to deliver on

a $6 million upgrade to a healthcare network and the US national grid came after Wipro for their

botched SAP upgrade. Apparently, the cost to undo the damage Wipro caused was more than the cost

of what they would have saved in the first place. In the end the Indian firm was sued for $75 million.

Concerns over lax regulatory practices and questionable attitudes to IP theft are partially

why the United States has blacklisted major companies from both India and China for this

kind of tech outsourcing. For any economy relying on their outsourcing industry to stabilize its

GDP that's a death blow. While these bands may have also had geopolitical motivations

they are a fantastic opportunity for an economy like the Philippines which doesn't need to be

perfect it just needs to be the least bad option. Western customs and strong regulatory practices

aside there is one more unique reason why the Philippines is so sought after. Its unique geography

plays a huge part in its outsourcing success. Unfortunately this factor also contributes

to its industrial stagnation. Being a series of islands with a small land mass means the Philippines

is immediately restricted with the services it can offer. Infrastructure connecting the islands

is limited or in some places it's just non-existent. Physically developing areas and industries

becomes a real and consistent challenge. Lack of usable land also means manufacturing and

transportation were never going to be the country's forte. On the plus side an immediate benefit from

this is not having to directly compete with China's manufacturing based economy. This naturally

inclines the Philippines into more white collar services where available land can be dedicated

to building offices and studios rather than plants or processing materials and harvesting

resources. Having a niche to carve out can be a good problem to have but everything in economics

is a trade-off. The Philippines imports more than exports to the tune of around a 57 billion

dollar deficit a year. That is a huge trade gap to fill for an economy of this size. Even if it

had a more robust manufacturing sector it would need to source revenue elsewhere. Sure some money

comes from services to overseas clients and there are remittances that's when Philippine

nationals working abroad send money back home but these steady streams aren't going to be enough

to stabilize the economy. There needs to be another more reliable way to close the trade gap.

Shipbuilding has been a promising growth industry. The country doesn't have the industrial capacity

to compete with the mega shipyards of Japan China and South Korea but instead of making a few

mega ships it has built a more reliable industry producing smaller less impressive vessels.

Due to its geography fleets of smaller cargo ships and ferries are already operating across

the archipelago so the country has a long history of dealing with these more basic vessels. For every

20,000 TEU cargo ship demanded by the world's largest shipping companies there are thousands of

ferries and basic faders crossing the world's oceans. This strategy of doing basic things and

doing a lot of it has really been the driver of the growth the Philippines has experienced over

the last two decades. It might sound mean to call an economy aggressively mid but that's really

been its strength. Basic services and basic shipbuilding are just the start too. Take their

technology sector. It focuses on small valuable components like basic microchip production.

Sure it's not as lucrative as the high end processor market and the Philippines tech sector

is certainly overshadowed by Taiwan but that's assuming that the Philippines needs to operate

in the same business at all. In reality basic microchips are in high demand. For every iPhone

or gaming rig a person needs there'll be dozens of other items in their homes running simpler

hardware with simpler chips and components. The trade-off here is that though the upper

levels of these billion dollar industries are out of reach the Philippines excels at mid-tier

operations. Put their basic microchips, basic shipbuilding, basic consulting and basic electronics

together and you've got a pretty formidable hold on middle of the road enterprises. The profits

may be low but so are the costs. Taking the middle of the road will only work up to a point though.

The world's leading advanced economies don't get there by harboring basic industries.

It can be a springboard but if the Philippines wants to break into the global middle class

it's going to have to upscale at least some of these industries. Now that is certainly possible

as we've already explored it has a talented workforce and good global connections but other

forces are at play that could threaten economic stability more than a competitive market.

Corruption in the Philippines is an open secret. It's so deeply entrenched across many levels of

government and business that it stunts economic growth from the get-go. Everything from the

misuse of public spending to good old-fashioned kickbacks and bribes. Domestic industries and

local businesses are less likely to receive funding from the country's government which already has

a history of eroding public trust. In 2021 a prominent anti-corruption journalist was shot

outside his home in what was a clear message to those wishing to hold their government to account.

Despite having a prolific radio show outing bent officials the alleged real mastermind behind

the assassination has not been charged. Instead the self-confessed gunman who many believe was

a foreguy has been sentenced to just 16 years. This is a pretty lenient sentence given the

Philippines' tough justice system. Possession of drugs in the Philippines frequently gets life

imprisonment or the death penalty by comparison. In 2023 the corruption perception index ranked

the Philippines 115th out of 180 countries. Even without the risk of holding corrupt governments

to account navigating red tape is enough to deter most Filipinos from setting up their own

enterprises. Outsiders are just as cautious preferring to do things at an arms length which

means it won't have the people willing to take the risks necessary to advance its industries

given the inherent sovereign risks that already come with the country. Uncertainty is an investor

repellent. The Philippines may offer a young workforce and an industry specialism with a

strategic location but the chance of political instability caps any confidence an outside investor

may have. However that is assuming that they are motivated purely by economic returns.

The Philippines president Ferdinand Marcos Jr, yep the junior of that Ferdinand Marcos who was

run out of his own country and said deep in ties with the USA and Japan would see a $100 billion

investment. This could be enough of a cash injection to improve their reputation. He has

claimed he wants to transform his country into a manufacturing and logistic hub. Such an ambitious

project could be what's needed to streamline business legislation and stamp out officials

driven by self-interest. To America the timing is perfect. Tensions in the South China Sea

demand fewer China and Taiwan centric supply chains. But to some nationals this potential

injection of capital will only exacerbate the already terrible inequality the country deals with

and they have a point. You can't stop politicians lining their own pockets by giving them more

money. Only a few islands are truly developed and that depends highly on how close they are to the

major islands that get a majority of the economic attention. Other times the province or a city

has a high GDP per capita because of tourism, agriculture and fisheries but the point is

inequality in the Philippines is inherent in its geography and exacerbated by questionable

governance. Manila for example is the most densely populated city in the world with a per capita

income more than 10 times higher than the remote islands. It's been rising at such a steady rate

that things are unlikely to even out in the future. Compare that to the living conditions of the

remote islands where a majority of people still live in absolute poverty. This disparity denies

talented workers from impoverished areas a real shot of making it in the outsourced labour market.

But muslim places like Manila are simply too expensive to uproot to. Ultimately the possibility

of upward social mobility is slimmer for anyone without a connection to the capital. Unfortunately

real living conditions are not much better for people in the big cities either. Some workers

can mitigate these costs by living outside Manila sure yet the vast urban sprawl has contributed

to terrible living conditions with basic amenities failing to keep up. Between 2000 and 2014 alone

14,059 hectares of built up area were haphazardly added to the city. Not only do these issues limit

the growth of a labour base it incentivises talented workers to leave. Most developing economies have

a brain drain problem but in the Philippines it's particularly acute because of the same

language and cultural skills that made the country so competitive in the first place.

This is all happening at a time where the country can least afford to lose its most talented because

it's in something of a race against the clock to become more advanced before it's made irrelevant

by new technology. Analysts predict the sectors to be most hit by AI will include things like back

office, customer service, call centres, warehouse, administration and logistics management. In other

words all the areas the Philippines specialises in as part of its outsourcing niche. Okay now it's

time to put the Philippines on the economics explained leaderboard. Starting as always with size

the Philippines has a GDP of 471 billion dollars making it the 32nd largest economy in the world

just behind Singapore and just ahead of Vietnam. Two other equally dynamic economies in the same

region that have achieved their economic scale in remarkably different ways. This gives the

Philippines a 7 out of 10. That very respectable GDP is however spread out over a large population of

115 million people which means the country has a GDP per capita of just 4130 dollars which despite

sustained growth over the previous years is still well below the global average of 13,000 dollars.

So the country gets a 3 out of 10. Stability and confidence is an interesting one. It has a level

of national security thanks to its unique relationship with the USA but that is quite

literally a double-edged sword which could open the country up to the complications we explored

in this video. Beyond that domestic issues like corruption and political tensions mean the country

can only get a 5 out of 10. Growth has clearly been very strong. The country has grown out a unique

set of local industries and capitalised on the talents of its large workforce. The country has

almost doubled its output over the last decade so it gets a 9 out of 10. Finally industry. The country

is not world leading at anything in particular but there is something to be said for being average

in a lot of average industries. Even still with a threat of AI, a reliance on foreign transfers

and very few local homegrown companies, the Philippines can only get a 6 out of 10.

Altogether that gives a country an average score of 6 out of 10, a healthy but middle of the road

score which has in many ways been the theme of this economy. Now last year we made a video on

Indonesia, an economy that on the surface looks very similar to the Philippines but is achieving

its record breaking growth in its own unique way. You should be able to click to that video on your

screen now. Thanks for watching mate. Bye.