Thailand & the Philippines

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We all know them - these two famous travel destinations. Bangkok, Manila, Markos, Aquino, american soldiers, the prostitution, the paradise island, the religion, the smiling people, the rice, criminality, tourism, the music.

So how has it been going for them the last 40 years?

How about the wealth, the education, the justice, the future?

In comparing the Philippines and Thailand, the most telling fact is that, in their divergent economic performance during 1952-92, Thai (per capita) gross national product - which in the beginning was half that of the Philippines - by 1992, was more that double that of the latter.

Socially and economically, Thailand is a loosely structured nation.

Along with the dominant Thai majority, a number of other ethnic groups enjoy a great deal of freedom, especially in business.

Even social control among the Thais is weak. But the country has a socially cohesive culture and a relatively strong administrative structure.

In order to remain independent, Thailand developed an effective administrative structure as a matter of necessity, to defend the country against foreign aggression as well as to promote internal stability.

Unlike in the Philippines, in Thailand locally born Chinese were entitled to citizenship.There are many more Chinese in Thailand than in the Philippines. Economically, Bangkok can be regarded as a Chinese city.

As King Chulalongkorn said many years ago " I regard the Chinese not as foreigners but as component parts of the kingdom".

The Philippines in contrast made things difficult for the Chinese as early as 1921. By enacting various laws and rules like the Bookkeeping Law (1921)and the Retail Trade Nationalization Law (1954) which allowed no foreign ownership at all.

This was a severe blow to the Chinese as most did not have Philippine citizenship.

The strength of anti-Chinese feeling in the Philippines is reflected also in the frequency of anti- Chinese violence.

The Thai government at least let them engage in their traditional trading business, even while they had to content with harassment and extortion by government officials.

The presence of Japanese in Thailand is conspicuous not only in industry but in export-import, in wholesale trade, in banking and services as well. The Philippines was, however, much more restrictive.

Since Thailand had no technology base for industrial development, foreign companies were welcome in practically all manufacturing fields, at least in the initial phase.

It took more than 40 years for the Philippines to come around to the realization that the country needs foreign investment for development.

Today the amount of Japanese investment in the Philippines is minuscule compared with that of in Thailand.The cumulative total foreign investment, between the initial boom period of 1987-1992, is 797 million U.S. $, to the Philippines vs. 11.9 billion U.S. $, to Thailand.

The difference in the flow of foreign investment produced a significant disparity in the growth performance of the two countries.

This liberal Thai attitude towards foreign investment resulted in the overbearing presence of the Japanese.

Financial institutions are among the most regulated in both countries.

Overall, the Central Bank of the Philippines was far less effective in developing financial markets and imposed greater cost to society, than the workings of the Bank of Thailand.

The litigious environment in the Philippines had probably been carried over form its former colonial master, the United States.

Various court cases were won by banks taking on the central bank. This real possibility of a bank winning a case against the Central Bank made it difficult for the Philippines to take pre-emptive action against a mismanaged bank.

The history of relying on outsiders to fill the post of governor of the Central Bank is in great contrast with that of the Bank of Thailand where the governors have been officials who rose from the ranks.

Also, the Bank of Thailand paid it's staff far better than all other Thai government or Philippine government agencies. The biggest problem being in the Philippines is, that their central bank was/is expected to help finance government deficits.

In contrast, there was greater monetary stability and discipline in Thailand.

As a result, the external value of the peso depreciated dramatically in this 40 year period. Form Peso 2 per U.S. dollar, to around 24 now. The value of the Thai baht depreciated only from around 20 baht, to 25.4 baht per dollar, currently.

The 43 year history of the Central Bank of the Philippines is a story of decline. As it evolved into a politicized, weak bureaucracy, it also became too diversified an institution for a central bank.

For sure both countries had their scandals but in contrast, the Bank of Thailand did a much better job in creating a modern banking system.

The story is similar regarding their stock exchanges; the lack of effective supervision by the S.E.C was one major reason for the inability of the stock market to develop further in the Philippines.

The Manila and Makati Stock Exchange are much older than their counterpart (S.E.T.) in Thailand (1927 vs. 1974), but recently the S.E.T. is a bigger market than the stock exchange in the Philippines.

The 43 year history of the Central Bank of the Philippines is a story of decline. As it evolved into a politicized, weak bureaucracy, it also became too diversified an institution for a central bank.

For sure both countries had their scandals but in contrast, the Bank of Thailand did a much better job in creating a modern banking system. The story is similar regarding their stock exchanges; the lack of effective supervision by the S.E.C was one major reason for the inability of the stock market to develop further in the Philippines.

The Manila and Makati Stock Exchange are much older than their counterpart (S.E.T.) in Thailand (1927 vs. 1974), but recently the S.E.T. is a bigger market than the stock exchange in the Philippines.

The differences were not confined to the financial sector. Differences in approach between Philippine and Thai government corporations were most clearly further demonstrated in electric power generations and air transportation.

Brown outs, mismanagement and outright fraud are in sharp contrast with the Electric Generating Authority of Thailand (EGAT) which has a record of efficiency and profitability.

Philippine Airlines was another badly run government corporation. After terribly abuses by the Marcos family the Aquino administration took over in 1991, its losses amounting to over 520 mill. U.S.$ In contrast, Thai Airways International, is a model airline in a developing country.

It has earned profits during most of its 32 year history. Ironically, the better-run Thai International was always headed by the Air Force Chief. Import Substitution Industrialization.

Thailand handled the matter of industrialization better than the Philippines did, succeeding in making manufactured goods the major exports in the 1980's. Critically, it did not make the mistake of protecting its industry to much.

The two countries took vastly different approaches in the area of exchange control. Exchange control not only became a hotbed of corruption but also a source of distortions of market forces in he Philippines.

The Thai government's firmer commitment of monetary stability reduced the temptation to print money; a temptation which the Philippine government succumbed.

In the early 1970's, total Thai exports were still less than Philippine exports. Yet two decades later, the reverse is true.

In Thailand, although primary goods increased in absolute terms, manufacturing exports rose much more rapidly. Currently, total exports by Thailand are around three times that of the Philippines.

The Thai government too faced the problem of Muslim separatism, but the level of violence in this conflict was much lower and restricted to smaller economically less significant areas.

It was also more experienced in dealing with Muslims; more so than the Christian Filipinos, who were ignorant of the Muslim way of life when they took over the government.

The impression that Thailand is a peaceful country is generally correct. The Thai government was fairly adept at handling large-scale organized violence/crime, but was not so effective in controlling smaller crimes and lesser violence.

It was unusual for the police to be ring-leaders of kidnapping and other criminal syndicates, the same problem which was plaguing the Philippines around 1990.

The crime outlook was much worse in the Philippines; many foreign expatriates were kidnapped or killed. Many Japanese tour agents wrote off the Philippines as a tourist destination. Also, concerned with their employees and families they began shelving their investment projects.

If the Thai police were corrupt at the fringes, the Philippine police were/are rotten to the core. Early victims of kidnappers went to the police, and discovered that the kidnappers were real police men.

Often these "insiders" had access to files on Chinese businessmen who had applied for naturalization and so could select wealthy Chinese businessmen as their targets.

In Thailand, though the police are often criticized, one does not hear much about the judges. It is said that although the rich and influential tend to be favored in civil cases, judges are fair in criminal cases. Even in civil cases, Thai judges seem to be generally fair and no blatant cases of injustice have been reported. In contrast, in the Philippines even before martial law, many judges in lower courts were said to be corrupt and the rich and powerful could get away even with murder.

The back log in cases is much worse in the Philippines, one study showed that even if the judges were to work 50 % faster, in the court of tax appeals, it would still take them some 476 years to catch up.

It is said that there were about 44,000 lawyers in the country, compared to Thailand's 5,000 and that many of them were the "world-class champions of delay". The penal system was another big problem. 2,700 prisoners escaped between 1987 and 1992, most often prisoners who served life sentences. No such reports come out of Thailand.

Coups in Thailand with almost no exception, did not affect the economy; in fact their economic results were usually positive. The history of coups d'etat in the Philippines is shorter and confined to more recent years, but when they occurred, they involved a large number of soldiers, caused many casualties, and rocked the economy to its foundations.

Why did the Philippines have so many more problems upholding peace and order than did Thailand? One overall cause is the fact that it is a much more divided country. Created by the Spaniards, and maintained as a colony for a little over 300 years; in a way the Philippines was created and managed as a "joint venture" of the Spanish king and the Catholic Church.

Clearly they are not as unified as Thai Buddhism. In the 1970's more clergymen became critical of Marcos and gave their support to the leftist movements fighting him and including themselves in the Communist Party.

Thai Politics was dominated by the military for most of the 40 year period, but compared with the Philippine situation, government authority was more acceptable to the people and the bureaucracy was more effective.

There was no political meddling in the matter of civil and military promotions, as often happened in the Philippines, and so no decline of moral due to the loss of privileges, as was often the case in the Philippines.

A country usually emphasizes civic and morale education in order to promote national integration and to inculcate among the people values that will maintain the peace. In this task, Thailand has a big advantage; it's national language.

From top to bottom of Philippine society, almost everyone seemed to be pursuing his personal objectives with little regard to the social rules. It seems to be a country where the national ambition is to change one's nationality.

It is a big mistake to think that developing countries face the same problems and travel the same path. The path to these goals varies by country, for a developing country that practices full democracy (in form) could still fail in its pursuit of economic development. The Philippine experience is an example of that.

The Philippines can develop a growth-friendly democracy, but the chances for that are slim, given the social, religious, ethnic and linguistic divisions and the presence of the largely uneducated poor masses.

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