A Seldon Plan for the Philippines Martijn Sinninghe Damsté

eufom European University for Economics & Management A.s.b.l.

Master ThesisSupervisor: Prof. A. ReuterImmatriculation: 328982Presentation date: 28 August 2015

Table of Contents

Introduction

Part 1. Overview

Part 2. Internal Factors

Part 3. External Factors

Conclusion

Introduction

● Inspiration: I. Asimov and his Foundation series

● Psychohistory

Introduction

Problem-solving question:How can the Philippine economy develop

from an underdeveloped into an emerging economy, taking into account internal developments and the hegemonic rivalry between the United States of America and the People's Republic of China?

Part 1. Overview

Gene

ral

Ove

rvie

wHistory

Spanish colonial age

US colonial age

Independence (Cold War and Marcos)

Politics(nominal democracy)

Political families

Nepotism and corruption

Political developments

Constitutional reform (cha-cha)

Bangsamoro

Part 1. Overview

Source: www.investphilippines.info/arangkada/executive-summary

Part 1. Overview

OFWRemittances

PHILIPPINE ECONOMY

CORRUPTIONTAX LEAKAGE

AND AVOIDANCE

POVERTY AND INEQUALITY

Part 2. Internal factors

CULTURE

170 ethnic groups

Moro people

Sinophobia

Cultural pessimism

• More distinct due to Islam

• Peripherical region

• Grievances

• Blind acceptance authority

• No own initiative

• Fatalism• Short-term

thinking• Social tolerance

to corruption• Religion• History

• Cultural diversity is risk factor

• Currently low profile but need to be aware

Part 2. Internal factors● Trends and developments

● Ageing of the population● Macro-economic outlook positive but to be taken

with a grain of salt● 6th Kondratieff – (psycho-social) health. Chances for

medical tourism

Part 3. External factors

Sino-American hegemonic rivalry

Hegemonic Stability Theory (HST)

Balance of PowersTheory (BoP)

Hegemon if:Will to lead

Ability to leadCommitment

If one country becomestoo powerful, others will

form a coalition to counter it

Unipolarity Multipolarity

1945-1991US hegemony

USSR contender

1991-nowUS hyper power

Rise of China

Multipolar futureChina not interested in

hegemonyFriction but escalation

unlikely

Part 3. External factors

Part 3. External factors

Game Theory

• Prisoner’s Dilemma and Hawk-Dove-Bully-Retaliator• Negotiations are the best option

Economic scenarios

• Maintenance of the Status Quo• Escalation• Asian Finlandization• Detente – most favorable

Conflict management

• In escalation (9 phases) focus shifts• From problem to person, from rational to emotional• Political supporters, voters, lobby, interest groups• The ‘human factor’

Conclusion

No changeCorruption Nepotism

Disfunctionaldemocracy

Tax leakage

Culture

Unrest

Poverty

Weak growth

ConclusionInclusive political/

economic institutionsExtractive political/

economic institutions

TransparencySocial mobility

CertaintyLevel playing fieldLong-term vision

Rules applied/changed for all

Closed small 'elite'No social mobility

Kleptocracy, corruptionNo certainty, rules can be

adjusted for benefitof elite

Examples:USSR + most successorsSaudi Arabia + Gulf States

North KoreaZimbabwe

Examples:USA

CanadaN. and W. Europe

Japan

Durable growthLimited sustainability

ConclusionInclusive political/

economic institutionsExtractive political/

economic institutions

What arethe Philippines?

Nominal democracy but..Small elite of political dynasties

Rent-seeking elitePoverty, inequalityNo social mobility

Rules only for elite, nepotismNo transparency, corruption

Cultural tolerance

They have(mostly) an

extractive system

ConclusionInclusive political/

economic institutionsExtractive political/

economic institutions

Bangsamoro

Transparency

Tax Reform (IBFD)

Infrastructure

'Social Revolution'

Constitutional reform

Anticipation for ageing

Anti-poverty programs

Medical tourism

Short term

Long term Long term

Short term

Conclusion

External factors

High economic exposureVery friendly relation

Geographically far away

Limited economic exposureProblematic relationGeograpically near

Escalation-0.18–+0.16%

Detente+2.3%

Status Quo+2.0%

Asian Finlandization+1.6-1.8%

Friendly but critical allyNegotiation

Improve relationsTrade

TourismOFWsFDIs

Questions?