During the 2024 Global Governance Summit in Manila organized by the Institute of Corporate Directors (ICD), it was inevitable to have discussions on the grim reality that the Philippines lingers with a pervading risk environment that continues to exacerbate its arduous task towards achieving our dream of becoming a high-level economy by 2046, our centennial year celebrating 100 years of Philippine independence.

According to the World Bank, a high level economy is currently pegged at US$14,005. Assuming we average a respectable 6 percent annual growth rate and based on today’s per capita of $4,200, per capita shall hover at $13,500 by 2046 — nominal at that and still stuck at mid-level economic status. This is alarming and embarrassing. More importantly, millions of Filipinos will continue to face poverty, hunger, social inequality and unemployment for an extended amount of time, not to mention the lost opportunities that we as a decent society deserve and pray for. We have to shape up fast.

If India and Vietnam have excelled towards 8 percent annual economic growth in 2024, surely we can do the same through long term sustainable growth but not just in traditional manufacturing, tourism, information technology, foreign remittances, trade and investments but quite necessary to act also in highly underdeveloped but extremely high potential industries such as reforestation and responsible mining. Yes, we have to shape up fast not just in a few key industries but across the board!

A reflection of industry performance could be traced on our capital markets. According to Dr. Jess Estanislao, our stock market should be more inclusive and must grow considerably, as it transforms itself in line with the further professionalization and modernization of our ASEAN counterparts. The main difference, as our Philippine Stock Exchange (PSE) now ranks 5th among the ASEAN in terms of market capitalization, is the sheer number of listed companies stuck at less than 300. Further to this, the market capitalization of top publicly-listed Philippine companies far outweigh the rest of the bourse. Unlike our ASEAN neighbors, the stock exchanges are truly representative of a true market rather than a boutique list of players that seemingly pervades the PSE. Fortunately, the PSE is constantly upgrading and its management has identified its priorities. Let us support our beloved PSE in our joint aspirations for a more formidable Philippine stock exchange.

As of November 2024, the total market capitalization of the PSE hovers around US$340 billion (CEIC), representing a modest share of the global market. This figure pales in comparison to traditional Asian powerhouses like Japan, with over US$6 trillion in market capitalization, and emerging markets such as India, with over US$3.5 trillion. The gap is widening. There have been conclusions that it is just too expensive to list, thus making this quite restrictive. Further to this would be the avoidance of the responsibility and costs involved for full disclosures — a short term investment no doubt, however, quite necessary to consider for long term strategic plans for enterprises, particularly as part of a conglomerate design for corporate sustainability. Another contributing factor is the concentration of family-owned businesses in the Philippines, many of which are dissuaded by public listing due to concerns over transparency and the costs of compliance… but that would be another full article by itself. 

Looking ahead

To bridge the gap with global standards, the Philippines must prioritize reforms that promote inclusivity, resilience and sustainability. Key focus areas include:

1. Expanding market participation: Encouraging more companies to go public through incentives and capacity-building programs for SMEs.

2. Enhancing regulatory enforcement: Strengthening the capacity of regulators to monitor compliance and impose sanctions for violations.

3. Integrating strategic governance and sustainability principles: Supporting businesses and organizations in adopting frameworks through the highest levels of excellence in good governance practices.

4. Promoting diversity, equality and inclusiveness: Addressing imbalances in corporate leadership to align with global trends of inclusivity.

5. Digital transformation: Leveraging technology to improve transparency, streamline compliance processes, and enhance stakeholder engagement.

Until then..

(Dr. Carlos Jose P. Gatmaitan is an Independent Director, Fellow of the Institute of Corporate Directors, Senior Advisor of Reyes Tacandong & Co., and Faculty at the Ateneo Graduate School of Business. Please share your thoughts and comments at corgov.associates@gmail.com)