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Market Focus : 'Sick Man' of Asia Is Making a Healthy Economic Recovery : Led by a boom in exports, the Philippines is finally catching up with its neighbors.

June 13, 1995|CHARLES P. WALLACE | TIMES STAFF WRITER

LAPU-LAPU, Philippines — If President Clinton peeked at the back of his wristwatch, a Timex Ironman, he might be surprised to learn that this quintessentially American timepiece was made here in the booming center of the Philippines.

Timex is one of the largest employers in this Southeast Asian country, with 6,000 employees working three shifts at a sprawling factory complex at the Mactan Island Export Zone, just offshore from the big island of Cebu.

More than 80% of the company's watches are now made here, say Timex officials, who made the decision to move their operations out of the United States two decades ago in the face of spiraling labor costs, going first to Europe and South Korea, then to the Philippines.

"We're very bullish about Cebu," exudes Stephen Trombitas, president of TMX International Ltd., the company's overseas arm. "We're making a multimillion-dollar expansion and expect to increase output by 20%. It's very, very easy to produce here."

Long regarded as "the sick man of Asia," the Philippines is pulling out of a decade-long slump. The economy grew by 4.3% last year and government economists are predicting a 5% increase this year, a figure which only a few years ago would have been regarded as astonishing.

More important, unlike previous economic expansions, the boom this time is being led by exports, up 19.5% last year. That was one of the highest rates in Asia, where exports are a way of life.

Foreign companies, which in the 1980s shunned the Philippines as a land plagued by coups, earthquakes and the largest volcanic eruption of the 20th Century, are now piling into export areas such as Cebu and the southern city of Davao.

Cebu city Mayor Tomas R. Osmena noted in an interview that exports from the island have been increasing by 18% annually for more than a decade. They now total about $1 billion a year.

Cebu has been such a success, in fact, that the island is now suffering the first signs of traffic jams and water shortages associated with too much growth. A survey conducted by the U.S. Chamber of Commerce indicated that American firms were planning to invest $1.2 billion in the Philippines during 1995 alone. Money is also pouring in from Singapore, Taiwan and Hong Kong, and plants are being opened in most parts of the island nation.

Acer Computer, the giant Taiwanese hardware manufacturer, announced last week that it was setting up a $26-million assembly plant at Subic Bay, the former U.S. naval base northwest of Manila, on the main island of Luzon. The base was converted into a manufacturing zone and regional transport hub after the Americans were kicked out in 1992.

Foreign companies such as Acer and Timex are primarily attracted by cheap labor--most workers earn a minimum wage of $5 a day, and unions are not allowed in the export zones. While low paid, the workers nonetheless are often highly educated, speak fluent English, and many have technical skills.

When National Semiconductor placed a help-wanted advertisement for technicians, more than 1,000 qualified people turned up at the factory gates for a job interview.

"The Philippines is on the threshold of an economic miracle--if the leaders take bold action now," Michel Camdessus, managing director of the International Monetary Fund, commented during a visit late last year. Missing for many years, it's the kind of praise the country is beginning to hear on a daily basis.

"We believe that the Philippines is in its strongest position in more than a decade, with improved economic performance and political stability providing the foundation for further consolidation of recent achievements," noted a report on Asia issued early this month by Salomon Bros., a New York brokerage.

Much of the credit for the turnaround is being given to President Fidel V. Ramos, the cigar-chomping former general who as deputy chief of staff of the armed forces prophetically refused to back late President Ferdinand E. Marcos at the height of the "people power" revolution in 1986, leading to Marcos' overthrow and replacement by Corazon Aquino, the leader of the opposition.

The West Point-educated Ramos is more of a civil engineer than a student of economics, but since his election in 1992 as Aquino's successor, he has gently prodded the Philippines down the path of sweeping economic reform.

In addition, Ramos provided the country with peace and stability, in sharp contrast to the series of violent coups that shook international confidence in the Aquino administration. Ramos also has been lucky: The Aquino regime was shaken by losses caused by the June, 1991, eruption of Mt. Pinatubo and other natural calamities. His term has seen fewer distracting emergencies of the sort.

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