Remittance Rankings + Philippines

♠ Posted by Emmanuel in ,, at 6/14/2007 10:20:00 PM
I was enjoying a leisurely stroll through economic blogland when I landed on Dani Rodrik's fine new weblog. He linked to an article entitled "Avoiding the crush" from the Financial Times on how China is making it difficult for other developing countries to develop following the path that Japan, Hong Kong, South Korea, Taiwan, etc. have taken and that China is now following. You know, well-known Robert Wade "Governing the Market" and Alice Amsden "Asia's Next Giant" state-led development stuff. Things started to go awry when Alan Beattie, the author of the article, mentioned the Philippines thusly:
The country attracts little foreign direct investment and Filipinos still go in their millions to work abroad. Remittances form more than 10 per cent of gross domestic product, the highest ratio in the world [my emphasis].
Armed with this statement, I checked up on a pretty good book on the topic of remittance flows, "Remittances: Development Impact and Future Prospects" edited by Samuel Munzele Maimbo and Dilip Ratha. Lo and behold, I came across the following chart on page 24:
Now I may not be very bright, but it seems to me that the Philippines is not even among the top 20 countries in terms of remittances received as a percentage of GDP. For shame, Alan Beattie! My next gripe is with this idea of Beattie's:
Being a developing country used to be easy. You followed leaders - Japan, Hong Kong, Taiwan, South Korea - up a well-trodden ladder from agriculture through manufacturing to services. Starting with tilling the soil, you moved on to turning out T-shirts, then toys, then tractors, then television sets, and ended up trading Treasuries.
Nevermind that the Philippines would be rather better off right now if it were so damn easy, but why are we to assume that there is "one best way" to development? Beattie's "one best way" thinking mirrors that behind the naive neoliberal Washington Consensus model propagated earlier by the World Bank and IMF to poor effect which the countries he mentioned have wisely avoided. But, instead of assuming that there is an ideal type neoliberal model to follow, he substitutes it for a Wade/Amsden state-led developmental ladder. India provides a good counterpoint to this "Beattie Consensus" (just kidding about the pun). The less-than-ideal state of India's transportation infrastructure has been widely noted. However, it still manages to do well in service industries with its large, well-educated, English-speaking workforce. Given the country's size, India's industrial output is hardly comparable to China's, but it is developing at a fairly rapid clip as well due to a strong service economy.

A final point I would like to dispute is Beattie's idea that remittances are some sort of developmental death kiss and a mark of backwardness. Again, I am no genius, but it seems that India has done quite well for a country which receives the most remittances in the world. Heck, even the beloved China is fourth on the list:

The Philippines is justly regarded as a developmental basket case. However, going into direct competition with China doesn't seem to be a wise prescription. Instead of "avoiding the crush," it probably would get crushed the moment it did so. It has scored minor victories like Texas Instruments deciding to build its new chip plant there instead of China due to rising costs in the Middle Kingdom, but those are few and far between. On the balance, its comparative advantage may be better suited to service industries instead of large-scale industrialization. Let's face it: the Philippines missed the latter boat long ago. On the balance, India, not China, is a better muse for the Philippines given their similar struggles against corruption, ethnic tension, and weak infrastucture as well as their advantages in service industries.