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Geo-Strategy

Thailand vs the Philippines: Exploring Economic Pathways

Introduction

In Southeast Asia, two nations, Thailand and the Philippines, have emerged as economic players in recent times each with its own distinctive set of strengths and weaknesses. This in-depth discussion embarks on a profound analysis, peeling back the layers of their economic narratives to reveal their unique progress, challenges, and roles as dynamic economic players within the ASEAN region. Let us delve into it.

Thailand: Navigating Economic Rebirth

Thailand, with a population exceeding 69 million, has carved its place as a dynamic economic player, boasting a robust GDP of 543 billion United States Dollars and a per capita income of 7,800 United States Dollars. However, its economic journey has been punctuated by significant challenges, particularly the profound impact of the COVID-19 pandemic. In 2020, Thailand faced a sharp economic contraction of 6.1 percent, primarily due to its heavy reliance on exports and tourism. The pandemic dealt a severe blow to these sectors. Yet, Thailand’s resilience shone through in the post-pandemic era, with a rebound to 1.5 percent growth in 2021, strengthening further to 2.6 percent in 2022.

Looking forward, the International Monetary Fund (IMF) projects a continued upward trajectory for Thailand, with expected growth rates of 3.6 percent in 2023 and 3.8 percent in 2024. These figures underscore the nation’s capacity for economic rebirth and adaptability in the face of adversity.

Thailand’s economic prowess relies significantly on its exports market, with goods exports constituting a substantial portion of its GDP, standing at 61 percent in 2022. Key exports include automobiles and parts, computers, jewelry, rubber products, and plastic pellets. The tourism sector, another vital contributor, is on the path to recovery, with 11.2 million foreign tourist arrivals in 2022, a remarkable surge from the 428,000 in 2021. Although, it has to undergo a long journey to reach the pre-pandemic levels, expectations are high, with projections of 28 million foreign arrivals in 2023 and 35 million in 2024, indicating a promising resurgence.

In managing its economic journey, Thailand has navigated the challenge of a rising public debt-to-GDP ratio, which reached 61 percent in February 2023, up from 41 percent before the pandemic. The government took on significant borrowing (1.5 trillion baht or £35 billion) to fund COVID-19 stimulus measures. However, manageable risks to fiscal sustainability persist, given that most of the debt is denominated in local currency, with ample domestic liquidity available to meet the government’s refinancing needs. External debt accounts for less than 2 percent of the total public debt.

A notable concern in Thailand’s economic landscape is its high level of household debt, among the highest in Asia. Before the pandemic, household debt was at 80 percent of GDP, and it saw a sharp increase, reaching 86.9 percent of GDP in the fourth quarter of 2022. It’s a challenge that necessitates attention in the nation’s economic journey.

Thailand’s commitment to international trade is evident through its 14 regional and bilateral free trade agreements (FTAs) with 18 countries. As a member of ASEAN, Thailand is part of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade deal as of January 2022. The RCEP is a collaborative effort among the 10 ASEAN members, along with China, Japan, South Korea, Australia, and New Zealand. This agreement not only eliminates tariffs but also harmonizes rules of origin, which is critical for the duty-free treatment of products.

Although Thailand has expressed a keen interest in becoming a part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the advancement of this endeavor has encountered setbacks primarily attributable to reservations surrounding the agricultural and pharmaceutical sectors.

Public investment and government spending play pivotal roles in Thailand’s economic recovery. The public sector continues to invest in various construction projects, including upgrading the rail network, intercity motorways, and the Bangkok mass transit system. Additionally, the 20-year Transport System Development Strategy (2018-2037) outlines plans to expand airport capacity, improve infrastructure in the Eastern Economic Corridor (EEC) economic zone, and focus on key industries like automotive, smart electronics, medical tourism, and more under the Thailand new four point zero industrial strategy.

GDP Growth is an area of optimism, with the IMF estimating a per capita GDP of around US$7,500 in 2022 and anticipating an increase to about US$10,500 by 2027.

In assessing country risk, Thailand falls within the low to moderate range, similar to other nations like the Philippines, India, and Indonesia. The OECD assigns Thailand a country credit rating of 3, indicating a relatively low to moderate likelihood of the country being unable or unwilling to meet its external debt obligations.

Political risk is another factor to consider, as the discord within the ruling coalition and tensions between the government and opposition parties, have the potential to result in protests and civil unrest. Thailand has a history of military coups, contributing to the risk of political violence.

The governance indicators in Thailand are robust, with a track record of transparent and predictable fiscal and monetary policies, maintaining economic and financial stability through political cycles.

The Philippines: Charting a Prosperous Course

The Philippines, spanning over 7,600 islands and home to a population exceeding 110 million, is charting a course toward economic stability. It boasts a robust GDP of 440 billion United States Dollars and a per capita income of 3,905 billion United States Dollars.

Despite the challenges presented by the COVID-19 pandemic, the Philippines demonstrated remarkable economic growth, with GDP surging from 5.7 percent in 2021 to a robust 7.6 percent in 2022. This achievement is a testament to the nation’s economic resilience.

Looking ahead to 2023, the Philippines anticipates continued economic strengths. In the context of our comparative analysis, it’s crucial to examine the factors that shape the Philippines’ economic journey. A robust export sector and strong household consumption have been instrumental in driving GDP growth, compensating for weakening investment growth in the country.

However, challenges loom in the form of weakening external demands amid tightening global credit conditions, which could impact Philippine exports.

Nonetheless, there is optimism in the form of increased public spending, particularly in infrastructure development. President Ferdinand Marcos Junior is committed to allocating five to six percent of the country’s annual gross domestic product (GDP) to the infrastructure initiative, ‘The Build, Better, More.’ These investments are expected to enhance the business climate, attract foreign investment, and boost productivity. According to IMF projections, growth is anticipated to average 6 percent per year between 2024 and 2027, underlining the nation’s promising economic journey.

Longer-term macroeconomic fundamentals are favorable, underpinned by a large and youthful population. The government’s commitment to enhancing the investment climate through increased infrastructure spending further bolsters the nation’s growth potential.

In exploring the economic pathways of the Philippines, it’s essential to consider the impact of the COVID-19 pandemic. The pandemic hindered government poverty reduction efforts and human capital development, causing the poverty rate to rise to 18.1% in 2021 from 16.7% in 2018. Nevertheless, as we examine the nation’s economic journey, the IMF projects a positive trajectory, with GDP per capita expected to rise above US$4,800 in 2027, from an estimated $3,500 in 2022.

Assessing country risk is a pivotal aspect of understanding the Philippines’ economic journey. The nation falls within the low to moderate range, with the OECD assigning a country credit rating of 3.

Political risk in the Philippines is evaluated as moderate. The government’s focus on security and anti-drug initiatives has implications for the operating environment. While the country ranks low on the World Bank’s political stability index, domestic politics has not significantly impacted economic growth or fiscal reform historically.

Governance indicators in the Philippines are broadly in line with the emerging Asia average.

Distinctive Pillars of Economic Strength

  • Thailand:

Thailand’s economy flourishes through diverse sectors, including manufacturing, agriculture, and a burgeoning tourism industry. Bolstered by its strategic location and strong infrastructure, Thailand has become a hub for manufacturing, particularly in electronics, automobiles, and textiles.

  • The Philippines:

In parallel, the Philippines shines in the service sector, capitalizing on Business Process Outsourcing, manufacturing, and tourism. A skilled and English-proficient workforce has propelled its role as a global destination for business process outsourcing services.

 

Navigating Economic Realities and Political Dynamics

 

Thailand’s Political Landscape

Both nations navigate complex economic landscapes underscored by distinctive political dimensions. Thailand’s constitutional monarchy provides a stable foundation for economic growth, shaping economic policies and development.

The Philippines’ Political Environment

The Philippines, a democratic nation, traverses political challenges to cultivate a business-friendly environment. It continues to improve its Ease of Doing Business ranking, showcasing its dedication to fostering a conducive ecosystem for investment.

Urban Quality and Aspirations

Urban quality takes center stage, with Thailand’s capital, Bangkok, and the Philippines’ Manila, both striving to secure spots among the world’s most livable cities.

Tracing Trade Routes and Investment Horizons

Tracing the economic pulse, Thailand’s exports totaled 282 billion USD in 2022, driven by electronics, automobiles, and agricultural products. Meanwhile, the Philippines showcased exports totaling 105 billion USD, with electronics and machinery leading the charge.

Foreign Direct Investment remains a linchpin of economic vitality, with Thailand attracting substantial inflows totaling 6.6 billion United States dollars in 2022. The Philippines, writing its narrative of growth, welcomed FDI inflows of 7.5 billion US dollars.

As custodians of financial stability, Thailand’s central bank reserves reached  273 billion US dollars, mirrored by the Philippines’ Bangko Sentral ng Pilipinas, safeguarding assets of 107 billion US dollars.

Forging Forward

In summation, Thailand and the Philippines embark on distinctive pathways toward economic prominence in Southeast Asia. As both these nations continue their economic odysseys, the world watches with anticipation, recognizing that the journey toward economic dominance transcends the present horizon. The stage is set, and Thailand and the Philippines, each with its unique narrative, stand poised to inscribe new chapters in the annals of regional economic influence.

Analysis

Philippines to conduct ambitious exercises with the U.S. as concerns over China grow

Philippines to conduct ambitious exercises with the U.S. as concerns over China grow

The Philippines and the United States are gearing up for their most ambitious joint military exercise to date due to escalating tensions with China in the South China Sea. This year’s Balikatan drills, set to commence from April 22 to May 10, will see more than 16,000 soldiers conducting joint naval exercises beyond the Philippines’ territorial waters for the first time since the exercise’s inception in 1991. The expanded scope of the drills reflects growing concerns over Chinese activities in disputed areas of the South China Sea. These maneuvers will involve a joint command center coordinating four major activities focused on countering maritime and air threats.
Officials revealed that the exercises will feature operations such as the simultaneous securing of two islands along the Philippines’ western and northern coasts, followed by the deployment of High Mobility Artillery Rocket System (HIMARS) launchers for live-firing exercises. Additionally, Philippine naval vessels will showcase a newly acquired ship-based missile system in coordination with U.S. Air Force squadrons, culminating in a simulated strike on a decommissioned vessel. The exercises aim to foster integration between Philippine and U.S. forces, bolstering their readiness as a unified fighting force.

Commodore Roy Vincent Trinidad, a spokesperson for the Philippine navy, stated that the drills convey a clear message: the Philippines is prepared to defend its sovereign rights and is not acting alone in safeguarding regional security. The increased military cooperation between the Philippines and the U.S. comes because of heightened tensions, particularly around strategic areas like the Second Thomas Shoal, where recent confrontations with China have raised concerns about potential conflict in the region.
The Biden administration’s commitment to the Philippines’ defense has been underscored by warnings that any armed attack against Philippine military vessels would trigger the U.S.-Philippine mutual defense treaty. President Biden reaffirmed the “ironclad” U.S. defense commitment during President Ferdinand Marcos Jr.’s visit to Washington, highlighting the strategic importance of countering Chinese assertiveness in the region.
The deployment of U.S. medium-range missiles in the Asia-Pacific region has further exacerbated tensions with China, marking the first such deployment since the Cold War era. China’s Foreign Ministry spokesman, Lin Jian, expressed grave concern over this move, denouncing it as a unilateral effort to enhance military advantage near China’s borders. The deployment, confirmed by the U.S. military on Monday, strategically positions a mid-range capability missile system on northern Luzon in the Philippines, within range of vital locations along China’s eastern coast.
Analysts view this deployment as a significant development with potential implications for regional security dynamics. Eric Heginbotham from MIT’s Center for International Studies highlighted the system’s role in countering Chinese military capabilities, particularly concerning Taiwan. Wilson Beaver of The Heritage Foundation emphasized that while the current deployment is limited, a more permanent presence of such systems could complicate Chinese military planning, especially regarding scenarios like an invasion of Taiwan.
The U.S. military’s strategic posture in the Pacific aligns with broader regional security goals, as emphasized by Commander Charles Flynn of the U.S. Army Pacific Command. Chinese officials have repeatedly voiced opposition to actions perceived as threatening regional peace and stability, citing concerns over heightened tensions in the South China Sea and Taiwan Strait. Overall, these developments underscore the evolving dynamics and geopolitical tensions in the Indo-Pacific region, with implications for broader security strategies and regional stability.

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Asia

In a significant move, India delivered BrahMos missiles to the Philippines

In a significant move, India delivered BrahMos missiles to the Philippines

Background

The BrahMos missile system, a collaborative endeavor between India and Russia, stands as a testament to the ingenuity and strategic foresight of both nations. Conceived in the late 1990s, the project aimed to develop a supersonic cruise missile capable of delivering precision strikes at incredible speeds. Named after the Brahmaputra and Moskva rivers, it symbolizes the convergence of Indian and Russian expertise in defense technology. Over the years, the BrahMos missile has evolved into one of the world’s fastest and most versatile cruise missiles, showcasing the capabilities of Indo-Russian cooperation in the realm of defense.

Development of BrahMos missile system

The development journey of the BrahMos missile system has been characterized by innovation, collaboration, and strategic vision. Beginning with the conceptualization of a joint venture between India’s Defence Research and Development Organisation (DRDO) and Russia’s NPO Mashinostroyeniya, the project aimed to harness the technological prowess of both nations to create a formidable weapon system. Through years of research, testing, and refinement, the BrahMos missile system emerged as a flagship project, demonstrating India’s indigenous technological capabilities and its ability to collaborate on complex defense projects with international partners.

The Genesis of BrahMos: From Concept to Reality

The genesis of the BrahMos project can be traced back to the late 1990s when India and Russia embarked on a journey to develop a supersonic cruise missile. Driven by the need to enhance India’s defense capabilities and bolster strategic deterrence, the project brought together the expertise of Indian and Russian scientists and engineers. The collaboration aimed to leverage the strengths of both nations in propulsion, guidance systems, and materials technology to create a missile system unlike any other. Named after two iconic rivers, the BrahMos missile symbolizes the synergy between India and Russia in pursuit of technological excellence and national security.

Strengthening Bilateral Ties: The India-Philippines Defense Deal

In January 2022, India and the Philippines signed a landmark defense deal worth US$ 375 million, laying the foundation for enhanced cooperation in defense technology and strategic partnership. Central to this agreement was the provision for the export of BrahMos missiles to the Philippines, marking a significant step in India’s defense diplomacy. The deal underscored India’s commitment to bolstering the defense capabilities of its allies in the Indo-Pacific region, particularly in light of growing security challenges posed by regional adversaries. For the Philippines, the acquisition of BrahMos missiles represented a strategic investment in national security, providing the country with a potent deterrent against potential threats.

The Delivery: Bridging Distances, Strengthening Alliances

On a bright Friday morning, the skies above Manila witnessed a historic moment as an Indian Air Force C-17 Globe master jet descended, carrying the first batch of BrahMos missiles destined for the Philippines. The delivery, meticulously planned and executed, marked the culmination of years of negotiations, technical cooperation, and diplomatic efforts between India and the Philippines. Symbolizing the strength of bilateral ties and the shared commitment to regional security, the arrival of the BrahMos missiles in the Philippines sent a powerful message to allies and adversaries alike. With each missile launcher, radar unit, and command-and-control center, the Philippines bolstered its defense capabilities, ensuring a swift and decisive response to emerging threats in the region.

Unleashing BrahMos: A Game-Changer in Modern Warfare

The BrahMos missile system represents a paradigm shift in modern warfare, combining speed, precision, and versatility to deliver devastating blows to enemy targets. With a top speed of Mach 2.8, the BrahMos missile outpaces conventional cruise missiles, making it virtually impossible for adversaries to intercept or evade. Its ability to be launched from multiple platforms, including submarines, ships, aircraft, and land-based launchers, gives it unparalleled flexibility on the battlefield. For the Philippines, the acquisition of BrahMos missiles heralds a new era of defense capabilities, providing the country with a strategic edge in safeguarding its territorial integrity and national interests.

Global Interest: The BrahMos Phenomenon Goes International

The delivery of BrahMos missiles to the Philippines has sparked interest from other nations seeking to enhance their defense capabilities in the face of evolving security challenges. Countries like Argentina have expressed interest in acquiring BrahMos missiles from India, recognizing their unparalleled speed, range, and precision. The growing international interest in BrahMos missiles underscores their status as a game-changer in modern warfare and a symbol of technological prowess and strategic deterrence. As India expands its defense partnerships and strengthens its position as a net security provider in the Indo-Pacific region, the BrahMos missile system emerges as a key instrument of peace, stability, and deterrence.

End Note

The delivery of BrahMos missiles to the Philippines marks a significant milestone in India’s defense diplomacy and strategic outreach in the Indo-Pacific region. It underscores India’s commitment to strengthening bilateral ties, fostering regional security, and promoting peace and stability in the face of evolving security challenges. As the BrahMos missile system finds new homes across the globe, it serves as a testament to the ingenuity, innovation, and collaborative spirit of nations working together to safeguard shared interests and uphold the principles of sovereignty and territorial integrity. In an era defined by uncertainty and complexity, the BrahMos missile system stands as a beacon of hope, deterrence, and resilience, embodying the collective aspirations of nations to build a safer, more secure world for future generations.

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Analysis

Philippines, the United States, Australia, Japan to hold joint air and sea drills in South China Sea

Philippines, the United States, Australia, Japan to hold joint air and sea drills in South China Sea

In a significant move aimed at addressing China’s growing assertiveness in the disputed South China Sea, the United States, Australia, Japan, and the Philippines have announced plans to conduct joint naval and air drills on April 7, 2024. This coordinated effort, named the “Maritime Cooperative Activity,” will be held within the Philippine Exclusive Economic Zone (EEZ) and is strategically timed ahead of an upcoming trilateral summit involving US President Joe Biden and the leaders of the Philippines and Japan. The defense chiefs of these four nations emphasized that the joint exercise aims to showcase their collective commitment to increase regional and international cooperation in support of a free and open Indo-Pacific.

According to statements from the Japanese embassy in Manila, the drills will involve the participation of naval and air force units from all participating countries, focusing on enhancing interoperability in doctrines, tactics, techniques, and procedures, with a specific emphasis on anti-submarine warfare training. The decision to hold these joint drills and convene the upcoming summit follows ongoing tensions in the South China Sea, notably characterized by confrontations between Chinese and Philippine vessels near disputed reefs.

China has accused the Philippines of escalating tensions in the region, where longstanding maritime territorial disputes persist. In response, US Defense Secretary Lloyd Austin reaffirmed America’s unwavering commitment to defending the Philippines against armed attacks in the South China Sea, highlighting the shared commitment to uphold international law and ensure freedom of navigation.

Meanwhile, ongoing talks between the Philippines and Japan for a defense pact allowing troop deployment on each other’s territory reflect Manila’s efforts to strengthen partnerships because of regional challenges. Japanese Prime Minister Fumio Kishida has emphasized the need for Japan to play a larger role in providing options and support to Southeast Asian countries, aligning with broader efforts to foster trilateral cooperation in various sectors, including technology and energy development, with the United States and the Philippines.

The upcoming joint naval and air operations in the disputed South China Sea signal a deepening of ties among the participating nations. This exercise highlights their collective commitment to regional stability and the rule of law in the Indo-Pacific. China’s continued assertion of claims over contested waters, including those also claimed by the Philippines, Japan, and self-ruled Taiwan, has prompted the United States to strengthen alliances in the region, particularly with treaty allies Japan and the Philippines.

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