Monday, September 26, 2011

Running On Empty? Maybe Not

I'm no economist. Yet as an expat American residing in the Philippines,  there are certain facets about the financial system here that I can't help but notice and which seem paradoxical for an "impoverished third world" country.

For example, as a whole, the Philippines has managed to avoid the fallout from the Great Recession and in some ways is faring better than the U.S.  It's true that remittances from OFW's (overseas Filipino workers) have played an invaluable role in the economy of this country.  But equally important is ensuring that this revenue reaches it's intended recipients and in turn that they and others with the means to do so have a safe place to deposit and invest their money. In this regard the  banking system seems  to have remained stable despite occasional scandals  and failures involving individual institutions.  In fact, considering all the fraud that takes place in both the public and private spheres here, it's amazing that the financial services network hasn't long since imploded.  Instead, like "Old Man River", it just keeps rolling along.   Likewise the Philippines Stock Exchange appears to be holding its own—no crashes and on the whole, no wild swings in stock prices.

Unlike its counterpart in the States, real estate here seems to still be a fairly safe bet, even though foreigners face certain ownership restrictions in this area. For the most part, there have been no precipitous declines in property values.  If anything, buying a home is still a sound investment and is an aspiration within the reach of many middle-class Filipino families albeit with help from relatives.  Part of this stability is due to the fact that home purchases here entail large down payments and short term mortgages.  However, in a country where there is no mandatory title insurance—and in fact land titles and registration are often of dubious authenticity where they exist at all—this stability still flies in the face of common sense.   For a much more eloquent discussion and guidance on real estate in the Philippines, visit "Phil FAQs".

Another area in which many business people in the Philippines have found their niche is franchising.   Opportunities abound that may make this country a major player in this sector in Asia.

Sadly however,  for the overwhelming majority of Filipinos, life is still hard.  The main reason is too many people competing for resources that are too few or are inequitably distributed.  Take public utilities for example.  Electric bills in the Philippines are the highest in Asia, constituting on the average 11% of Filipinos' locally derived income.

Yet for many Americans, especially retirees whose sole means of support are earned benefits such as social security, life is also a struggle. For instance in parts of the U.S.that have cold winters, those on limited means may have to decide whether to spend their money either on food or on fuel for their furnaces, in other words a choice between heating and eating.

In the aforementioned case of energy bills, thanks to the rate of exchange between the U.S. dollar and the Philippine peso (currently about 43 PHP to 1 USD), along with our frugal standard of living, for my wife and me  this expense represents on the average about  01.5% of our monthly U.S..earned benefits.  So for foreigners whose mains source of income is social security and whose life style is not extravagant, to the extent that various economic trends here continue on a steady course, life in the Philippines can be a rewarding and comfortable experience.