BOOK REVIEWS: BREAKOUT NATIONS: PHILIPPINES TO BE A TIGER ECONOMY

MANILA, JULY 3
, 2012 (SUN STAR ONLINE) A NEW book tracking the progress of developing countries sees the Philippines joining an elite group of "tiger economies" in the world as a result of reforms and strong leadership of President Benigno Aquino III, Malacanang said on Saturday.

The book "Breakout Nations: In Pursuit of the Next Economic Miracles," written by Ruchir Sharma, assessed the Philippines as one of the strongest emerging economies in the future where enhanced economic activities are to take place.

"Now at long last, the Philippines looks poised to resume a period of strong growth. The new President, Benigno ‘Noynoy’ Aquino III, probably has enough support, and looks likely to generate just enough reform momentum, to get the job done. The Aquino name is still virtually synonymous with the promise of change," Sharma wrote.

Sharma, one of the world's largest investors in emerging markets for Morgan Stanley, said Filipinos saw Aquino as an honest figure who could deliver on the Aquino mandate for change and that the public was desperate after nine years of drift and decay under former President Gloria Macapagal-Arroyo.

Aquino won the presidency at a time when it seemed that the whole country was in disrepair, he said, adding the President is delegating power to competent technocrats and seems to understand what needs to be done to get the country move forward.

In a recent Wall Street Journal report, the publication sees the Philippines having clear signs of being seen as one of the most resilient economies in a troubled global economy particularly as a result of the European crisis.

In a supplement entitled "Asia's Euro Risk: How Asia Will Fare if Europe Cracks?," the Wall Street Journal said only four economies were projected to have the strength to weather a European economic and financial crisis, namely Australia, China, Indonesia and the Philippines.

While other countries bear the brunt of the European fall out, these countries have deep government pockets that provide a buffer to economic shocks, the publication said.

"The Philippines is better prepared than in the past to withstand a downturn with a stronger government balance sheet and a robust domestic economy. Foreign reserves are high enough to fight capital flight," according to WSJ’s brief assessment of the Philippines.

Singapore, Malaysia, Thailand and Vietnam are among the Southeast Asian countries affected by a euro meltdown because of their high dependencies on European trade and greater exposure to European banks, WSJ said.

The Philippines had the second highest per capita income in Asia during the 1960s, next only to Japan. In the 1970s, South Korea and Taiwan overtook the Philippines in terms of per capita income. Other Asian neighbors like Malaysia, Thailand, China and Indonesia followed during the succeeding decades. (SDR/Sunnex)

BLOG WATCH: BOOK REVIEW OF BREAKOUT NATIONS

Breakout Nations by Ruchir Sharma (photo) is based on two strong arguments:

1. The era of easy money and easy growth is over.

2. The rapid growth of emerging countries is not going to continue.

As the head of emerging market equities and global macro at Morgan Stanley Investment Management, Ruchir seems to be the best person to lay out these contrarian arguments. Ruchir does not take the garb of a clairvoyant, but carefully builds up the case with sufficient data and experiences. Any forecast about global growth de-alienating India and China should be carefully thought out to appear credible. This is exactly where Ruchir scores.

Ruchir has adopted an interesting way to make his statements convincing to the reader. He relies on certain sets of data (like the current per-capita income, demographics etc), a set of observations (like overspending by people, traffic situation in the cities etc) and calibrates them with commonsense to make some sound judgments. The book leverages his day job as an investor looking closely at various nations.

Ruchir is used to spending a week per month in the countries under discussion to get the pulse. He relies heavily on his travels mostly by road in these places, his interactions with locals and underlines the importance of these to see beyond the Excel spreadsheets.

Breakout Nations says that there is no magic formula or potion that guarantees growth. However, free market flow of goods, money, people, visionary and committed leadership, banks channeling money to enhance productivity, better roads, and better schools among others serve as essential ingredients to continued success. It is also essential to understand the interplay of economic and political forces. In the same breath, he says that it is fallacy that a particular type of government (democracy, communist, authoritarian etc) can ensure sustained economic progress. It is the leadership which matters.

Ruchir’s explanations are very lucid and logical. Analytical data is presented to substantiate his statements. Examples are reeled out to further elaborate points. Ruchir does comparisons with various parameters with a keen eye to make the context clear to the reader. The Breakout Nations as per him are Czech Republic, Turkey, South Korea, Nigeria, Indonesia and the nations in East Africa. He dives deep to give his readers, the on the ground account of these countries. He compares and contrasts these countries amongst their peer countries and the economists’ favorites – India, China, Brazil etc.

The author very elegantly handles this otherwise pedantic topic. Hence, the book appeals to the layman and to the economic analyst alike. He carefully dethrones several myths we have, thanks to various media who do not bother to go beyond the surface. He clearly deduces facts based on which he identifies the star nations of tomorrow, than singing paeans to the media hyped emerging nations of the world. Very convincingly, he explains why there exists exorbitantly high room rates and high affinity to luxurious lifestyle by the rich in Russia, ratio of billionaires to millionaires in countries, share of manufacturing in GDP of a country, are pointers to their future. In short, he provides the readers with a keen eye to detail when we want to decide where to invest.

Ruchir also revels in some beautiful prose. Innovative use of words (eg. efficient corruption, creative destruction), titles of chapters, proverbs, and quotes all help to keep you riveted to the book. It was not like reading research findings. As another reviewer pointed out, this book is a business travelogue.

Ruchir ends the book strongly with a Latin proverb, “If there is no wind, row”. In his own words “No nation can hope to grow as a free rider on the tailwinds of fortuitous global circumstance, as so many have in last decade. They will have to propel their own weight….”

In short, Breakout Nations defies conventional wisdom and the author does not follow the beaten path. He finds healthy economics behind the dull architecture in Poland and believes a leader who gets economy right can get away with almost anything in politics.

This book is for those who love to find aesthetics in numbers, for those who don’t get enticed by just the bust-waist-hip numbers as they don’t guarantee fertility.


Chief News Editor: Sol Jose Vanzi

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