The Society of Honor by Joe America

By Karl M. Garcia

A country becomes stronger not simply when its economy grows, but when each period of growth leaves it better equipped to handle the next crisis.

This is where the Philippine development challenge becomes clearer. The country has a large domestic market, a young and globally connected workforce, internationally competitive service industries, an established electronics sector, and a strategic position in one of the world’s most economically important regions. Yet these advantages have not translated into sufficiently broad-based productive capacity, reliable public services, or the economic resilience that Filipinos should reasonably expect from decades of development.

The problem is not that the Philippines lacks potential. It is that too much of its potential fails to accumulate into lasting national capability.

A depreciating peso, expensive electricity, food-price volatility, infrastructure bottlenecks, industrial dependence, and recurring institutional failures may appear to be separate problems. They are connected, however, by a deeper question: Does the country emerge from each cycle of growth, spending, disruption, and reform more capable than it was before?

Development must do more than produce economic activity. It must expand what a country can reliably produce, deliver, maintain, learn, and withstand.

That is the difference between an economy that grows and one that compounds its strengths.

The peso is a signal, not the whole diagnosis

When the peso weakens, the consequences are immediate. Imported fuel, machinery, medicines, fertilizers, animal feed, and industrial inputs can become more expensive in local currency. Businesses face higher costs, households lose purchasing power, and inflation can erode the gains from employment and wage increases.

The effects are uneven. Exporters and households receiving foreign-currency income may benefit, while import-dependent manufacturers, small businesses, and ordinary consumers can face higher costs. The overall effect depends on the structure of trade, the extent of currency hedging, pricing practices, and the speed with which exchange-rate changes pass through to domestic prices.

A weaker peso is not automatically evidence of economic failure. Exchange rates respond to interest-rate differentials, global capital movements, the strength of the US dollar, commodity prices, trade balances, investor expectations, and domestic economic conditions. Nor can the government eliminate every external shock through domestic policy.

But repeated exposure to the same shocks should prompt a more searching question.

Why does an international increase in oil prices so quickly become a household crisis? Why do disruptions in global food markets expose persistent weaknesses in domestic agricultural productivity and logistics? Why do businesses still encounter costly power, transport, and administrative constraints that limit their ability to compete?

The exchange rate transmits external pressures. The structure of the economy determines how damaging those pressures become.

The objective, therefore, should not be to promise a permanently strong peso. It should be to build an economy in which currency movements, commodity shocks, and international disruptions do less damage to livelihoods and productive activity.

That requires more than monetary stability. It requires greater productivity, a stronger domestic production base, more diversified sources of supply, and institutions capable of responding effectively.

Thailand and the Philippines: Two development paths

The comparison between Thailand and the Philippines is instructive precisely because the two countries are not radically different in their starting conditions.

Around 1960, the Philippines had approximately 28 million people, compared with roughly 27 million in Thailand. The countries’ populations were of a similar order of magnitude. Both had opportunities to develop agriculture, manufacturing, trade, and export-oriented industries.

Today, the Philippines has a substantially larger population. Recent estimates put it at roughly 117 million, compared with around 72 million in Thailand. Yet Thailand’s nominal GDP per capita remains considerably higher.

For 2025, commonly reported estimates place Thailand’s nominal GDP per capita at approximately US$8,000 and the Philippines’ at around US$4,200. These figures are estimates, not definitive measures of household welfare. They are affected by exchange rates, price levels, revisions, and the choice of statistical source. GDP per capita also says nothing by itself about inequality, job quality, or the distribution of gains.

Nevertheless, the broad difference is meaningful. A larger population has not automatically translated into higher output per person in the Philippines.

The comparison becomes more revealing when we examine what the two economies have built.

Thailand developed substantial automotive and auto-parts industries, integrated manufacturing supply chains, food-processing capabilities, and a globally recognized tourism sector. These industries generate activity beyond their immediate operations. They support suppliers, logistics providers, technicians, engineers, maintenance businesses, training institutions, and specialized services.

The Philippines also has genuine industrial strengths, particularly in electronics and semiconductors. It has built a globally competitive business-process outsourcing sector, developed internationally mobile professional talent, and maintained important manufacturing and export activities. It would be inaccurate to describe the country as lacking industry or productive capacity.

The more important distinction is the breadth and depth of the ecosystems surrounding these strengths.

How many domestic suppliers can meet demanding international standards? How much higher-value engineering, design, research, and production takes place locally? How effectively do small and medium-sized enterprises enter export supply chains? How much domestic value is added before a product reaches foreign markets? How many workers acquire skills that allow them to move into progressively more productive and better-paid work?

These questions matter more than whether one country can be declared a winner in a simplified national comparison.

Thailand’s experience does not prove that every industrial policy succeeded, or that its economic model can be copied wholesale. Its economy faces its own structural challenges, including demographic aging, household debt, and uneven growth. Tourism can be vulnerable to external shocks, while an established automotive industry must adapt to technological change and new competition.

The lesson is not that Thailand has solved development.

It is that productive ecosystems can accumulate over time. Once a country has trained workers, capable suppliers, specialized infrastructure, established export relationships, and institutions that support production, each new investment has a foundation on which to build.

The next factory does not begin from zero. The next generation of engineers inherits experience. Local suppliers learn to meet higher standards. Logistics networks become more specialized. Skills circulate across firms. Knowledge that was once imported becomes partly embedded in the domestic economy.

The returns extend beyond the original investment.

This is what compounding development looks like.

Population is an advantage only when the economy can use it

The Philippines’ larger population is often presented as an automatic advantage. It is not.

A large population can support a substantial domestic market, a deeper labor pool, greater specialization, and a wider base of entrepreneurs and technical talent. It can make large-scale infrastructure, manufacturing, and service industries economically viable.

But population growth also increases the demand for schools, healthcare, housing, transport, energy, water, and employment. If productive capacity and public services fail to keep pace, the same demographic scale can intensify congestion, underemployment, inequality, and fiscal pressure.

The relevant question is not whether the Philippines has too many or too few people. It is whether its economy creates enough productive opportunities for its people.

A young worker is not an economic dividend merely because the worker is young. The dividend emerges when education builds useful skills, firms create productive jobs, infrastructure connects workers to opportunities, and institutions make it possible for businesses to grow.

Otherwise, the country invests in raising, educating, and training people only to see many of its most capable workers leave because the opportunities they seek are unavailable at home.

Overseas employment brings remittances, supports household consumption, and gives Filipino workers valuable experience. It also demonstrates the international competitiveness of Filipino talent. But remittances cannot substitute for a domestic economy capable of employing more people in high-productivity activities.

The goal should not be to discourage migration or to treat working abroad as disloyalty. It should be to make remaining in the Philippines, returning to it, or building a business there increasingly attractive options.

The country needs to turn its demographic scale into productive scale.

From individual ingenuity to national capability

Filipinos are adept at finding ways around constraints. When roads fail, commuters improvise routes. When equipment breaks, workers find temporary fixes. When public systems are unreliable, families create their own arrangements. When institutions cannot coordinate, individuals build informal networks to get things done.

This ingenuity is real and valuable.

But a country cannot build a durable development strategy around the expectation that people will continually compensate for systemic weakness.

There is a difference between ingenuity that creates new possibilities and improvisation that merely keeps a failing arrangement alive.

If a hospital depends on extraordinary staff effort to overcome recurring supply shortages, the dedication of its workers should be recognized. But the institution should also investigate why the shortages recur. If a business relies on an employee’s personal knowledge to keep operations running, that knowledge should be converted into a process others can learn and maintain. If a local government repeatedly solves the same flooding problem through emergency measures, it should capture the lessons and address the underlying causes.

Otherwise, each crisis consumes time and resources without leaving behind enough new capability to prevent the next one.

National development requires a systematic transition from individual ingenuity to institutional learning.

That transition has several stages:

Resources must become capacity. Capacity must become capability. Capability must produce outcomes. And outcomes must strengthen resilience.

Resources include budgets, personnel, equipment, technology, and infrastructure. Capacity means having the means to perform a task. Capability means being able to perform it reliably, at the required standard, under real operating conditions. Outcomes are the improvements experienced by citizens and businesses. Resilience is the ability to sustain or restore those outcomes when conditions deteriorate.

The distinction is fundamental.

A government can allocate funds without completing a useful asset. It can complete an asset without maintaining it. It can purchase technology without developing the workforce or processes needed to use it. It can establish an agency without creating the authority, coordination, and accountability required to achieve its mandate.

Expenditure is not capability. Completion is not performance. Adoption is not mastery.

A country becomes stronger when public and private investments leave behind not only physical assets, but also the skills, processes, institutions, and knowledge needed to make those assets productive over time.

Public spending must create lasting productive capacity

The Philippines does not need to spend less on principle. It needs to get more lasting capability from what it spends.

Infrastructure can lower transport costs, connect remote communities, improve market access, and increase the productivity of firms. Public health spending can prevent illness and preserve the ability to work and learn. Education can expand human capability. Energy investment can support manufacturing and reduce exposure to supply disruptions. Digital systems can make public services faster and more transparent.

But the developmental return on spending depends on what happens after the appropriation is approved.

Was the project the right one? Was it completed at a reasonable cost? Does it function as intended? Is it maintained? Does it connect to other investments? Does it improve the productivity or welfare of its intended beneficiaries? Can the institution responsible for it demonstrate the results?

A completed road that lacks adequate drainage, maintenance, or connections to production centers may deliver less value than anticipated. A digital platform that cannot exchange information with other systems may create another administrative silo. A training program that records attendance but never measures whether participants acquire useful skills can report activity without demonstrating improved capability.

The same principle applies to health facilities, agricultural programs, industrial incentives, and local government projects.

Accounting has a particularly important role here. It should not stop at whether money was properly recorded, authorized, and disbursed. Those are indispensable requirements, but they are not the entire purpose of public financial management.

Financial information should help decision-makers understand the full cost of delivering a service, including maintenance, staffing, replacement, and long-term operating requirements. It should make it possible to compare what was spent with what was achieved, identify recurring cost overruns, distinguish productive investment from avoidable expenditure, and determine whether programs are generating durable benefits.

This does not mean every public outcome can be reduced to a simple financial ratio. Better health, learning, public safety, and environmental protection require multiple measures and professional judgment. Nor should governments confuse easily counted outputs with meaningful outcomes.

The purpose is to connect financial accountability with operational learning.

A government that knows where the money went but not why the program succeeded or failed has incomplete management information. A government that measures outcomes but cannot trace the resources and decisions that produced them also has incomplete information.

The two must work together.

Public expenditure should leave behind a stronger ability to deliver public value.

Industrial policy must build ecosystems, not just attract projects

If the Philippines wants to become more resilient, it must broaden its productive base.

This does not mean attempting to manufacture everything domestically. Complete self-sufficiency would be costly, unrealistic, and potentially counterproductive. International trade allows countries to specialize, benefit from comparative advantages, access advanced technologies, and obtain goods that would be expensive to produce locally.

The objective is strategic diversification: reducing dangerous concentrations of dependence while strengthening the domestic capabilities that offer the greatest economic and social returns.

For the Philippines, this means asking where existing advantages can support deeper and more complex production.

Electronics and semiconductors offer opportunities to expand technical skills, testing, design, advanced packaging, equipment services, and local supplier participation. Agriculture can benefit from better irrigation, research, storage, cold chains, mechanization, processing, and logistics. Food production can be connected more effectively to manufacturing and export markets. Renewable energy, grid development, energy storage, and efficiency can support a more reliable and competitive power system. Medical supplies, pharmaceuticals, transport equipment, and other strategically important sectors deserve careful evaluation based on economic feasibility, national needs, and realistic prospects for domestic capability.

Not every sector will succeed. Some investments will be commercially unviable. Some technologies will change before projects recover their costs. Some subsidies will protect inefficient firms rather than build competitive ones.

That is why industrial policy must have clear objectives, transparent selection criteria, measurable performance requirements, and credible exit mechanisms. Support should be conditional on progress in productivity, skills, technology adoption, exports, supplier development, or other relevant outcomes—not simply on a firm’s ability to secure government assistance.

The government should also avoid choosing industries solely because they are fashionable or politically attractive. A sector’s strategic importance does not automatically make every project within it worthwhile.

The central question is whether public policy can help create capabilities that individual firms would struggle to develop alone, while maintaining competition and fiscal discipline.

The aim is not to protect businesses from the need to become efficient. It is to make it possible for more businesses to become efficient, innovative, and internationally competitive.

China and the problem of concentrated dependence

The Philippines’ economic relationship with China illustrates why resilience requires a more sophisticated approach than either uncritical dependence or indiscriminate disengagement.

China is a major trading partner and an important source of imported goods, industrial inputs, machinery, and intermediate products. It is also a market for Philippine exports. In 2025, Philippine Statistics Authority merchandise-trade data placed China at roughly 11 percent of Philippine exports and nearly 29 percent of imports. The precise shares vary with the reporting period and trade classification, but the broad asymmetry is clear: China accounts for a substantially larger share of Philippine imports than exports.

That imbalance does not, by itself, establish that trade with China is harmful. Imports can provide consumers with affordable goods, give firms access to essential inputs, and help manufacturers remain competitive. Bilateral trade deficits are not equivalent to national economic losses, and the value of trade must be considered alongside investment, domestic production, employment, and the wider structure of the economy.

The vulnerability arises when dependence becomes concentrated and alternatives are difficult to obtain.

If a critical input comes from only a narrow set of suppliers, a disruption can quickly affect production. If domestic firms lack the capability to switch suppliers, adapt designs, substitute materials, or maintain strategic inventories, even a temporary interruption can become costly. If export markets are insufficiently diversified, changes in demand or trade restrictions can affect entire industries.

The answer is not to sever economically valuable relationships. Nor is it to assume that every import can or should be replaced with a domestic product.

It is to build options.

The Philippines can deepen trade with China while broadening relationships with Japan, South Korea, India, Europe, the United States, Australia, and other Southeast Asian economies. It can encourage domestic supplier development where feasible, improve trade logistics, identify critical supply-chain risks, and create contingency plans for goods whose interruption would threaten essential services or strategic industries.

This is diversification as risk management, not economic isolation.

The same logic applies to the country’s geopolitical circumstances. Economic engagement and national sovereignty are distinct questions. Trade should not be mistaken for a guarantee of political accommodation, and security disputes should not automatically dictate the elimination of every mutually beneficial commercial relationship.

A sovereign country needs the capacity to cooperate when cooperation serves its interests and withstand pressure when its interests are threatened.

That capacity depends partly on the range of alternatives it has developed before a crisis arrives.

Strategic autonomy is not the absence of interdependence. In a global economy, that is neither realistic nor necessarily desirable. It is the ability to manage interdependence without allowing a single relationship to become an unacceptable point of vulnerability.

Energy, food, and logistics are foundations of resilience

Some of the most important industrial policies do not look like industrial policy at first.

Reliable and competitively priced electricity affects almost every productive activity. Expensive or unreliable power raises manufacturing costs, limits the viability of cold storage, burdens small businesses, and reduces the attractiveness of investment. Improving energy resilience requires more than adding generating capacity. It also requires effective transmission, distribution, maintenance, competition, system planning, and the ability to integrate different energy sources reliably.

Agriculture presents a similar challenge. Food security cannot be reduced to maximizing domestic production regardless of cost, nor can it rest entirely on imports without regard to supply risks. It requires a productive domestic agricultural sector, efficient markets, better post-harvest handling, reliable logistics, and access to diversified international supplies.

The country must also treat transport, ports, digital connectivity, water, and disaster preparedness as interconnected productive infrastructure.

A road is more valuable when it connects farms to markets, workers to jobs, and suppliers to manufacturers. A port is more valuable when cargo can move efficiently through the wider logistics system. Digital connectivity is more valuable when businesses and public institutions can use it to coordinate activity, share information, and improve decisions.

Infrastructure should be evaluated as part of a system, not merely as a collection of projects.

The Philippines’ archipelagic geography and exposure to natural hazards make redundancy particularly important. Alternative routes, distributed infrastructure, resilient communications, emergency supplies, and interoperable public systems can all reduce the consequences of disruption.

Redundancy is not free. Building multiple routes or maintaining reserve capacity can increase costs, and not every service needs the same degree of backup. The appropriate level depends on the likelihood and consequences of failure.

The relevant calculation is not simply whether redundancy costs more than a single system. It is whether the additional cost is justified by the damage it can prevent.

A system designed only for normal conditions may appear efficient until the day it fails. A resilient system considers both everyday performance and the consequences of disruption.

Technology cannot substitute for institutional intelligence

Artificial intelligence, data analytics, digital records, and automated systems can help the Philippines make better decisions. They can reveal patterns in spending, identify bottlenecks, forecast demand, improve maintenance schedules, and make public services more accessible.

But technology does not automatically turn information into institutional learning.

A government may collect extensive data without changing a decision. An agency may produce dashboards without resolving the operational problems they reveal. An organization may deploy artificial intelligence while retaining outdated workflows, fragmented responsibilities, and weak accountability.

The real value of technology depends on whether institutions can use evidence to improve what they do.

That requires interoperable records, clear responsibility for decisions, staff who can interpret information, mechanisms for correcting errors, and procedures for determining whether interventions work. It also requires safeguards for privacy, cybersecurity, data quality, and due process.

The goal is not to build one enormous database or centralize every decision in a single institution. Centralization can create new vulnerabilities, concentrate power, and make failures more consequential. Interoperability and coordination can often achieve better results while preserving appropriate institutional boundaries.

Nor should every policy decision be delegated to an algorithm. Data can inform judgment, but it cannot eliminate political trade-offs, ethical responsibilities, or uncertainty.

The deeper objective is to make institutions capable of remembering what they learn.

When a program fails, the lesson should not disappear with the end of a project or the departure of an official. When a policy works, the reasons for its success should be documented and tested before it is expanded. When a new administration takes office, it should be able to distinguish valuable institutional knowledge from the preferences of its predecessor.

Continuity should mean continuity of learning, not automatic continuity of policy.

A capable state does not refuse to change. It knows how to change without repeatedly losing what it has already learned.

Resilience should not mean asking Filipinos to endure more

Filipino resilience is often celebrated as a national virtue. It is visible in communities recovering from disasters, families supporting one another, workers adapting to difficult circumstances, and people continuing to function despite uncertainty.

But resilience can become a dangerous idea when it is used to normalize avoidable hardship.

If communities are repeatedly flooded without adequate mitigation, if patients routinely face barriers to care, if workers must spend hours navigating unreliable transport, or if households absorb recurring price shocks without meaningful protection, praising their endurance is not an adequate response.

The people affected may indeed be resilient. The systems responsible for serving them may still be failing.

There is an important distinction between resilience as human strength and resilience as a public responsibility. Individuals and communities will always need the ability to respond to adversity. But governments and institutions also have a duty to reduce preventable risks, provide dependable services, and recover quickly when failures occur.

A resilient society should not be one in which people are exceptionally skilled at surviving the consequences of institutional weakness. It should be one in which those consequences become less frequent, less severe, and less costly.

This requires measuring more than economic growth.

Are household incomes rising faster than essential living costs? Are workers moving into more productive and better-paid employment? Can businesses withstand supply disruptions without prolonged shutdowns? Are health and education services dependable? Do infrastructure assets remain functional over their intended lives? Can communities recover from disasters without repeatedly losing the same homes, livelihoods, and public investments?

No single indicator can answer all these questions. Together, however, they offer a more meaningful picture of development than headline growth rates alone.

Growth matters. Fiscal stability matters. Exchange-rate movements matter. But they should be understood as parts of a larger objective: improving the country’s ability to deliver a better life under both ordinary and difficult conditions.

The measure of progress is what remains after the shock

The Philippines does not need a development strategy built around the illusion that every crisis can be prevented.

No country can eliminate external shocks, technological disruption, natural disasters, or geopolitical uncertainty. Nor can every investment succeed or every reform produce its intended result.

The test is what happens next.

Does the country learn from the disruption? Does it identify the source of the failure? Does it correct weaknesses without creating larger ones? Does it diversify where concentration has become dangerous? Does it maintain what it has built? Does the next investment benefit from the knowledge and capabilities created by the previous one?

These questions turn development from a succession of announcements into a cumulative process.

They also change how success should be judged. A project should not be considered successful merely because it was inaugurated. A program should not be considered effective merely because it spent its budget. A reform should not be considered durable merely because it was enacted. The more consequential test is whether each intervention leaves behind a demonstrable improvement in performance and a stronger foundation for future progress.

This is where financial accountability, industrial development, public administration, and national resilience converge.

Financial records should show not only what resources were used but what they helped create. Institutions should turn operational experience into better decisions. Industrial policy should deepen productive ecosystems rather than merely attract isolated investments. Infrastructure should improve the performance of connected systems. Trade relationships should create opportunities while preserving alternatives. Technology should strengthen human judgment and institutional memory rather than simply digitize existing weaknesses.

And public policy should reduce the amount of extraordinary effort citizens must expend to obtain ordinary services.

The Philippines already possesses important assets: human talent, a large domestic market, established export industries, entrepreneurial energy, international relationships, and significant opportunities in a changing regional economy. These are not guarantees of success. They are foundations on which more deliberate, sustained, and disciplined development can be built.

The central task is to connect them.

The country should not measure its future only by how much it spends, how many projects it completes, how fast its economy grows, or how well Filipinos endure adversity. It should also measure whether it is becoming more productive, whether its institutions are learning, whether its businesses can compete at higher levels of value creation, and whether its people have more reliable ways to secure a decent life.

A stronger peso may offer relief. Higher growth may create opportunity. New infrastructure may improve connectivity. But none of these achievements, by itself, guarantees a more capable country.

The deeper objective is an economy that produces more of lasting value, institutions that correct recurring weaknesses, and a society that can absorb shocks without forcing households to bear an unreasonable share of the cost.

The Philippines should not merely defend the peso against the next shock. It should build an economy in which the next shock does less damage.

That is what it means for development to compound: each investment creates more than an immediate output; each reform leaves behind more than a temporary improvement; and each crisis produces lessons that make the next crisis easier to manage.

Development is not the accumulation of projects. It is the accumulation of capability.

And national resilience is not the ability to endure the same weaknesses indefinitely. It is the ability to learn, adapt, and become stronger so that fewer people have to endure them again.