Churchouse Letter
December 2013         by Peter Churchouse

Love it, Hate it – But This Country Gets to You

I’ve been visiting one of my present favorites in terms of Asia plays for three decades. It’s a place that once had the brightest prospects in the region – then through terrible government and horrible corruption, threw it all away.

It once had the second-highest GDP per head in Asia. But from poster child it turned to the “sick man of Asia,” as virtually all its rivals left it in their wake.

I’ve seen the ups and downs first-hand over dozens of trips. This is a place where I’ve laughed and lapped up great company and scenery alike. It gets under your skin. And it’s also a place where I’ve been face to face with masked gunmen, threatened, shot at.

Now this nation is getting back on its feet, and how. It has the perfect demographic profile to see its economy explode. And under what looks like a committed leader, it’s finally tackling the rottenness that cored out the country.

This is a stock market that in the five years since the global financial crisis has outdone the much-talked about North Asian cluster by more than double.

This is a country that is the only one in the world where the rating agency Moody’s has a “positive” outlook for its banking system.

It’s a place that weathered the global financial crisis without recession.

Its overseas borrowing is down by more than half in just a few years, leaving it sitting pretty – prettier than most, anyway – if the tide of cheap money that has flooded Asia turns.

Inflation is down. Its banks are in good shape. Wasteful pork-barrel spending is being slashed. And its economy is growing at 6 to 7 percent – on par with China.

This is a country that I’m more bullish on that at any point in my 33 years in Asia. I feel its time has finally come.

Enjoy the issue,


Wil the Philippines' Crackdown on Corruption Lead to Prosperity>

For more than 30 years, I have been traipsing back and forth across the South China Sea to this nation of more than 7,000 islands. Most of my trips have been pleasure rather than business. Over 20 visits have been made by sea, in our annual sailing events from Hong Kong to the northern parts of the country. It’s a 600-nautical-mile adventure. Those 30 years of experiences of this country have brought fun, fear, levity, risk, laughter and tears. We have experienced the beauty of deserted tropical islands. We have worked hard, and partied backed by wonderful music. Our boat has been boarded by masked gunmen, and we have been threatened, locked up, and shot at.

We have been through earthquakes, storms and raging typhoons. We have seen heart-wrenching human conditions, awful poverty, and marvelled at this people’s abilities to sustain hardship and come out smiling. We have seen the dirty underbelly of corrupt politics, and got excited about the prospects of change for the better.

Sometimes I love the place. At other times despair is a better description. The country is a grand fusion of animism, Catholicism and Hollywood. You never know which part of the mix is going to rule the day. The country has gone through a series of massive changes in the past 200 years. This has created a society of many character traits, often in deep conflict with each other.

In the years after World War II this country was touted as the country most likely to lead the emergence of the “Asian Tiger” economies. It had all the ingredients, with the second-highest GDP per capita in Asia, some 10 percent higher than South Korea at the time. It was the largest recipient of foreign direct investment (FDI). It was a country truly on the verge of great things …

But that reality went horribly wrong.

This country is the Philippines.

What derailed its prospects? The country fell prey to a massively corrupt president and his gang of cohorts who economically raped and pillaged the nation. These people institutionalised corruption on a national scale for decades. And the Philippines slipped behind.

From being the poster child of hope for Asia, the Philippines became known more often as the “sick man of Asia”. In terms of GDP per capita, in the 1950s it was overtaken by Korea and Taiwan. In the 1970s, Thailand surpassed it. By the 1980s, Indonesia gained the upper hand. And in the 1990s China left it far behind. The Asian Tigers roared while this country flailed behind in a morass of inefficiency, corruption and mismanagement.

It is a country that has always seemed to have great promise but has delivered so little. On numerous occasions I have returned from visits to the country enthused by the promise of better days. But all too often that promise has not been delivered. I am not alone in that view. The Philippines is different from its regional neighbours. Its people are not of Chinese extraction, unlike many other Asian nations, although there is a small but important strain Chinese population, particularly in business. Its Spanish colonial history greatly influences the language and religion. Spanish architectural styles persist in many towns and villages, along with beautiful stone cathedrals. The country’s reputation for great musicianship, better-than-average education levels, and English language owes much to its American connections of more than 50 years. Its modern political structure emulates a lot of the U.S. system. Its cuisine however, with plain chicken and rice one of the national dishes, is probably best not discussed!

The Marcos Regime

Ferdinand Marcos was the president of the Philippines from 1965 to 1986. He, his wife and his cronies embarked on two decades of corruption and theft. The full scale of the plundering remains unclear to this day. It is estimated Marcos looted between US$5 billion and $10 billion from the Filipino treasury, stashing his funds in Swiss bank accounts. Monopolies in industries were created and awarded to friends and family. He imposed martial law for the first half of his reign. The press was silenced. His wife Imelda became a symbol of the excesses. She used private jets liberally. She spent tens of millions of dollars buying properties all over the world, especially in Manhattan. She amassed an art collection including works by Michelangelo. And she most famously accumulated a large and extravagant collection of shoes.

The Marcos regime was finally ejected in 1986, and the country embarked on elections and reforms. This has not been easy. Establishing all the organs of government needed to run a country of 100 million people scattered over thousands of islands is complex. And rooting out the endemic corruption that pervades the country was never going to be easy. The country has lurched from leadership to leadership, some more competent than others. But corruption has continued to rear its ugly head. The track record of leaders since the ousting of Marcos in 1986 has been mixed, to put it kindly. Reform and growth have pressed forwards, and then slipped back. Government finances and investment have similarly proven erratic…. The Charts below show just how far the country has slipped behind over the decades… It’s staggering…

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