The very nature of business makes it vulnerable to various factors, be it demographic or socio-political. So much so that entrepreneurs, especially those who engage with global clients and trends, have constantly been on the lookout for the latest data on world population and the freshest international news. In the past year alone, the economic effects of Brexit and the continuing tensions in the West Philippine Sea have been the talk across the country’s board rooms and meeting halls.
The fluidity of global demographics drives the growth, or lack thereof, of various economies, especially those of the United States, China and the rising stars in Southeast Asia. This point was tackled by Hokenson & Company economist and consultant Dr. Richard Hokenson at the recently concluded Philippines Investment Conference 2016, jointly organized by the CFA Institute and the CFA Society Philippines, where major investment concerns in banking, food, telecommunications, energy, commerce and other industries were discussed.
On the world’s ageing population and waning labor force
In his presentation, “Changing Global Demographics and Its Investment Implications”, Hokenson raised concerns on “the speed of ageing and the waning labor force in developed countries,” which could pose problems for the concerned economies in the near future.
“Fifty percent of the world is now urbanized, but nearly half of the world lives in countries that have birth rates below replacement,” Hokenson said.
As for the Philippines, his outlook focused on the internationally employed workforce sought after by many of the world’s strong economies. “You never run out workers. Besides, the Philippines has the best educated workforce in the region,” said Hokenson.
According to the World Bank, OFW cash remittances is “a key factor” in the resilience of the Philippine economy amid recent crises in the region and the world, with more than two million OFWs currently employed in such countries as Saudi Arabia, the United Arab Emirates and Singapore.
Meanwhile, Manu Bhaskaran, a Partner of Washington DC-based Centennial Group and founding CEO of its Singapore subsidiary Centennial Asia Advisors, identified for the delegates “the main geo-political challenges in Asia, sketching out possible scenarios of how they might unfold and affect economies.”
On China rising, ISIS, ASEAN leaders and Trump
Bhaskaran highlighted the continued rise of the Chinese economy in his presentation dubbed “Asian Geo-Political Trends: What Do We Need To Worry About?” He referred to China’s economic rise as reflective of “an era of disruption in the promotion of economic cooperation in the region.” Engaged in a heated dispute with neighbouring countries over the deposit-rich West Philippine Sea, China is the world’s second largest economy by nominal GDP, and is the world’s largest economy by purchasing power parity, according to the IMF.
“You need to be engaged with both, have communication lines open with both,” answered Bhaskaran on how the Philippines should address its relationship with both China and the US. “You need to work with allies, work with Vietnam, work with ASEAN.”
Bhaskaran pointed out to a breakdown of key risks in various countries in the world, focusing on the Asian market, and identified major issues which businesses are on the alert for. The Philippines, for example, had a “low” risk in leadership uncertainty, anti-market ideological shift, violent change and major conflict, and fared “moderate” in such areas as over-nationalism, business disruptions and regulatory and labor concerns.
While leadership uncertainty remains “low” for the Philippine economy, both Thailand and Malaysia are seen to have a “moderate” but “rising” risk on the leadership front which, according to Bhaskaran, centers on Thailand’s King Bhumibol battling health and ageing issues, and Malaysia’s Prime Minister Najib Razak facing corruption scandals.
Bhaskaran discussed other global issues such as the possible breakdown of existing structures in Korea and the Middle East, the rise of new classes and interest groups, and ideology shifts across the countries around the world. As to queries on the rising risk of terrorism in the Philippines and the Southeast Asian region, he foresees a possible weakening of investments should various outlaw groups band together under the ISIS banner. On the possible effects on the economy of a Trump presidency, Bhaskaran said this would not bode well for present and future US-Philippines investment opportunities.
In a statement released earlier in the conference, Dr. Andrew Stotz, CEO of A. Stotz Investment Research, noted the country’s potential of maintaining its economic position in the region. He affirmed that “the Philippines has been riding a long wave of positive developments.”
“Fundamentals of the companies are strong, earnings and price momentum are good, and risk is low. Of course, all that makes the stock market one of the most expensive in Asia,” Dr. Stotz explained. “However, given that financial risk of the listed companies is low, the stock market performance looks set to continue.”
Jerricho Reynaldo is an editor, writer, and creative and social media consultant. He has written for various local and international publications that include North Bound Magazine, asianTraveler Magazine and Planet Philippines. His writings and editorial work cover a wide range of topics, from food and travel, to business-lifestyle and entertainment. Read more of his works at Brewing Echo.