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.


jbushkin said...

This is an example of one of the great things about blogs on the internet. An open and frank discussion of important issues from a person who has "been there and done that. Mr Levy uses his background in financial services to help people take advantage of insight and valuable knowledge. I know this sounds like a book review, but the information in this article is timely and topical.

Secular Guy said...


Thanks for your support and encouragement. Coming from someone with your background, it means a lot.

My theoretical knowledge of finance and economics is woefully inadequate. So all that I can offer is personal experience and anecdotal observation in these fields. In doing so, I'm pleasantly surprised to find that I sometimes hit the mark.

Alan said...


Very enlightening - 3rd world country from a 1st-world point of view. What is the language situation? Is English the de facto language of public life?

Secular Guy said...


Thanks. Yes indeed, English is still alive and well here thanks to colonial mentality, not to mention the exposure to and eager consumption of American culture via TV, movies, music, Internet, etc.

However, Many Filipinos, especially seniors, argue that the quality of spoken English here has declined since "their day" as a result of a deterioration in the quality of public education over the years.

Be that as it may, English is still viable enough here such that the Philippines is the country of choice (well, maybe second to India) for American businesses in outsourcing their call centers.

Alan said...


Thanks for remionding me about this one. Jeff is right - a very astute summary. Think I'll stay in Rindge (though it would be fun to meet you and Lydia someday.

Secular Guy said...


Whoops! I'd forgotten that you already saw this post. No matter, at least saw it from a different angle vis a vis your post "White Man's Burden /Tales of the South Pacific (post nuclear version)".

As for our meeting some day, who knows? Anything is possible.