Philippine Elite Prospers But Poor Still Scraping By

RAHUL KHULLAR, an economist at the Asian Development Bank's (ADB) headquarters in Manila, is starting to get annoyed at his telephone. It rings too much.

Merchant bankers, investors, and journalists are usually at the other end of the line, asking him to explain what is going on in the Philippine economy. ``Suddenly,'' says an exasperated Mr. Khullar, who monitors the Philippines for the ADB, ``they are waking up to the fact that there's business to be done here.''

Philippine President Fidel Ramos, a retired Army general who has led this country since 1992, proudly touts the dramatic turnaround. Indeed, the country's gross national product (GNP), its output of goods and services, grew by a real 5.5 percent in 1993, exports rose by 18 percent, and imports by 22 percent.

The only catch is that the turnaround so far is mainly benefiting the elite, in a country where half the population of 65 million lives in poverty. ``Employment opportunities have hardly grown,'' Khullar notes. ``This is not something that can change overnight.'' The unemployment rate, now 9 percent, showed only a minor downtick last year.

At a luncheon with reporters last month, President Ramos was asked to explain what a 5.5 percent growth in GNP really meant. He responded with various numbers showing that many sectors were expanding - agriculture, tourism, housing, and construction. The reporter looked unconvinced.

The president explained that he had seen evidence of economic expansion in a busy ice-cream parlor. ``And I'm not talking about Magnolia,'' he added, referring to a local brand. ``They're buying Baskin-Robbins - 45 pesos [$1.88] a cone. Fifty-seven [$2.38] for a double,'' Ramos said, raising his eyebrows.

In the sprawling central market of Cebu City, the country's third largest, there are many small-scale businesspeople who wish they had more money for luxury goods like Baskin-Robbins ice cream. ``In the upper bracket, yes, there is growth,'' says Otilla Quijano, who sells baskets and other locally made goods from her stall. ``But we are not growing in the lower bracket. The poor are left behind.'' She says gross monthly income from her business is down by almost 50 percent compared with years past.

``We can survive,'' she adds, but the days when she and her husband could afford to go to the movies every week are gone.

There are other signs that, for now, the Philippine economic turnaround is limited in scope. On a weekday in Antipolo, a low-income housing development not far from Manila, dozens of working-age men can be seen sitting on their stoops or standing around street-corner shops.

Ramos is fond of mentioning the good reviews that his country's economy has received from the foreign press. Not coincidentally, economists say the president's greatest accomplishment has been to get people to rethink their perceptions about the Philippines, long considered economically moribund and a difficult place to do business.

Ramos's most concrete accomplishment has been to fix the country's notorious electricity problems. Although Manila movie theaters still hang banners proclaiming backup electricity supplies to ensure uninterrupted air conditioning, a national effort - including emergency powers granted to Ramos and private participation in the energy industry - has ended the brownouts that demoralized Filipinos and discouraged investors.

Through a combination of peace talks and military action, Ramos's administration has also given the country a greater sense of peace and stability. There are still communists in the hills and Muslim secessionists on the southern island of Mindanao, but they no longer pose a threat to the central government.

To many international economists and many Filipino businesspeople, Ramos's reform program has been sound. He has liberalized markets, endorsed free-trade regimes, opened formerly protected industries to outside participation, and dismantled monopolies. ``We feel he is pushing the right buttons,'' says Jose Luis Yulo Jr., president of the Philippine Chamber of Commerce and Industry.

Ramos and his advisers also talk about instilling a new sense of social responsibility in the country's wealthy, and Mr. Yulo says some of this rhetoric is taking hold. Instead of business owners simply paying themselves with their profits and avoiding the tax man, Yulo claims they are now contributing to the national coffers more willingly, investing in research and development, paying dividends to investors and even bonuses to their employees.

OF course, there are still challenges. The perennial summer water shortage in Manila is reaching crisis proportions, and the legislature has introduced a law that grants Ramos special powers to tackle the problem. Crime is more than just a distraction. Kidnapping - mostly of businessmen - remains an effective fund-raising tactic for criminals and insurgents.

The country is receiving a lot of outside money - about $4.5 billion in 1994, according to ADB estimates. About $3 billion, in roughly equal proportions, came from expatriate Filipino workers sending money home, foreign businesspeople making capital investments, and outside investors buying into Filipino enterprises. Most impressive of all, says Khullar, is that $1.5 billion came from Filipinos moving money they were holding outside the country - in, say, Switzerland - back into their homeland.

Such investors tend not to be speculators and tend to know what they are buying into, the ADB economist says. ``When you have very large reverse capital flight, that's the surest sign of investor confidence.''