Mongolia vs Philippines
- By Dulguun Bayarsaikhan -
- May 20,2018
Like Mongolia, the Philippines is a lower-middle income country with a GDP of 399 billion USD and although the two countries are less than five hours away, there is a great contrast between their economic and social situations. While Mongolia is landlocked and heavily dependent on mining, the Philippines is situated on an island with sea ports all around. It is primarily considered a newly industrialized country, with an economy in transition from one based on agriculture to one based more on services and manufacturing. The economy of the Philippines is the world’s 34th largest economy by nominal GDP according to the 2017 estimate of the International Monetary Fund. It was also defined as the 13th largest economy in Asia and third largest economy in the ASEAN after Indonesia and Thailand. The Philippines is one of the emerging markets and is the sixth richest in Southeast Asia by GDP per capita values, after Singapore, Brunei, Malaysia, Thailand and Indonesia. The country is expected to become an upper middle-income country by late-2019, with economic growth poised to clock faster driven by an ambitious infrastructure program, according to the National Economic and Development Authority. The economy of Mongolia, on the other hand, is one of the fastest growing economies in the world. Impressed with the developments in the mining industry and foreign interest increasing at an astonishing rate, Renaissance Capital predicted that the “unstoppable” economic growth would make Mongolia the new Asian tiger, or “Mongolian Wolf” as they prefer to call it. The principal industrial activities in Mongolia are mining and agricultural production, namely cashmere. GDP from mining averaged almost 1.78 trillion MNT from 2010 to 2017, reaching an all-time high of 3.97 trillion MNT in the fourth quarter of 2016 and a record low of 3.95 trillion MNT in the first quarter of 2010, as reported by Trading Economics. Meanwhile, GDP from agriculture averaged nearly one trillion MNT from 2010 to 2017, reaching an all-time high of 2.25 trillion MNT in the fourth quarter of 2017 and a record low of 0.46 trillion MNT in the first quarter of 2011. I had the chance to talk about the economic situation in the Philippines with local experts during my recent visit to the capital, Manila, for the 51st Annual Meeting of the Asian Development Bank (ADB)’s Board of Governors. After my initial surprise at the scorching but humid weather, I was fairly impressed with the completed and ongoing infrastructure work in the city. But in this article, I will compare the two countries with their economic performances as well as delve into some operations by ADB which accelerated each nation’s economic growth. Without further ado, let’s have a closer look at these two countries.
MongoliaThe economy revived in 2017 from slowing growth in previous years. Growth will remain solid in 2018 and 2019, albeit with slight moderation, thanks to large investments in mining, according to ADB. Inflation is expected to rise in 2018 before decelerating modestly in 2019, and the current account deficit will narrow considerably in 2018 before widening somewhat in 2019. Urban air pollution, especially in winter, poses an urgent and complex policy challenge. A fall in copper concentrate quality at the Oyu Tolgoi mine lowered mining production by 6.9 percent in 2017 in spite of a 32.7 percent increase in coal production attributed to favorable prices. Strong recovery in manufacturing—particularly in coal washing, cement production, and meatpacking—helped the industry contribute 0.2 percentage points to growth notwithstanding subdued mining production and a decline in construction. Large mining-related investments and imports underpinned expansion in the transport, wholesale, and retail industries, making the service sector the main driver of growth, with a contribution of 4.3 percentage points. ADB commended the government for slashing its budget deficit from 15.3 percent of GDP in 2016 to 3.9 percent last year through its commitments under an agreement with the International Monetary Fund Extended Fund Facility. Economic growth is forecast to decelerate slightly to 3.8 percent this year before shooting back up to 4.3 percent in 2019, supported by foreign direct investment anticipated to exceed one billion USD annually this year and next to develop the Oyu Tolgoi underground mine. The quality of copper concentrate from the open-pit mine is expected to improve significantly.
The PhilippinesBroad expansion in aggregate demand, attributed to higher export growth, underpinned strong economic growth last year. Inflation picked up, and the current account posted a marginal deficit, according to ADB. Accelerated investment is expected to offset moderation in exports this year and next, enabling higher growth. Inflation is forecast to edge up, and the current account to remain in deficit. ADB believes that strengthened project planning and implementation capacity is crucial to the success of an ambitious public infrastructure program in the country. The Philippine government has embarked on a massive infrastructure program worth 160 billion USD to 180 billion USD from 2017 to 2022, entitled “Build Build Build.” The program aims to address infrastructure bottlenecks that have long constrained Philippine competitiveness globally, as well as its long-term growth prospects. Under the program, public infrastructure spending is targeted to rise from 4.5 percent of GDP in 2016 to 7.3 percent by 2022. The program has already gathered momentum, with public spending on infrastructure estimated to rise by nearly a percentage point of GDP last year to reach 5.4 percent. This is a remarkable achievement for the first year. However, considering the wide array of infrastructure projects under the program, the challenge for the government is to ensure that government departments and other implementing agencies have the adequate absorptive capacity to roll out and implement such large and complex projects. Encouragingly, efforts are already underway to enhance the absorptive capacity of government agencies, including their technical and institutional capabilities for project readiness and budget execution. Initiatives include a proposed shift from a multiyear budget system to an annual cash-based system effective in January 2019, with a view to improving budget execution. A budget reform bill is being pursued in the legislature to institutionalize improvements in the financial management, budgeting, accountability, and result-orientation of the budget process and public spending.
ConclusionBoth Mongolia and the Philippines are considered fast-growing countries but the Philippines is hurtling toward becoming an upper middle-income country with its ambitious strides, while Mongolia continues to take less risky moves. The Philippines government may seem to be spending an alarming amount of money on infrastructure but this will ultimately bring much larger yield in the long run. Also, the government has shown a remarkable improvement in terms of government debt, depreciating it to 42 percent by the end of 2017, which is said to be the lowest in 20 years. This was possible with improvements to the fiscal management, consolidation of deficits, ramp-up in expenditure, and implementation of tax reforms. Playing safe is a good method to produce consistent results and that’s exactly what the Mongolian government has been doing so far. However, we can definitely do better considering the immense potential of the Mongolian people and the resources contained in our vast land. Right now, Metro Manila in the Philippines is fully engaged in construction work. This is what is needed to improve and develop a country. Mongolia has many targets and the main reason they haven’t been achieved is slow implementation, with the exception of long-term targets that require substantial time. Mongolia also needs to diversify its economy so that it can grow without being heavily dependent on mining. The Philippines’ economy and employment were dependent on agriculture several decades ago, but through investments and effective policies for the information and technology sector, it has become less dependent on farming and created many jobs in other sectors. Looking at this, investing in people and infrastructure like the Philippines will most likely boost Mongolian society and its economy.