In recent years, the Philippines has emerged as one of the fastest growing economies in the world, impressively rivalling the dizzying growth rates of fellow Asian countries such as China. Under the stewardship of the Aquino administration, the Philippines has presided over an unprecedented period of macro-economic buoyancy and political stability, which has, in turn, revived domestic and international business confidence in the Southeast Asian nation.

For the first time in its history, the Philippines managed to garner an "investment grade" status from the world's leading credit rating agencies in 2013. And most recently, the Standard & Poor's Ratings Services upgraded the country's credit rating to a notch above investment grade. In theory, this should allow the Philippines to attract greater foreign investment and gain affordable access to international capital for domestic development projects. The Philippines has significantly improved its rankings in all major economic competitiveness and opening indices.

In a country known for its chaotic political scene and hyper-critical media landscape, President Benigno Aquino III has astonishingly maintained high approval-ratings among the citizens, who have come to credit him for the Philippines' newfound confidence and dynamism in recent years. The Philippines hosted (21-23 May) the prestigious World Economic Forum on East Asia, which brought together leading policy-makers, businessmen, and journalists from across the world.

The event served as a platform for Filipino leaders to highlight their country's resilience amid continued economic stagnation in the West and declining growth rates among leading emerging markets such as Brazil, Russia, Turkey, and India. The Aquino administration triumphantly showcased its recent achievements - ranging from the country's huge foreign currency reserves and declining debt, to moderate inflation and interest rates, which underpin the recent economic boom - to attract greater Foreign Direct Investment (FDI) into the Philippines.

A more careful look at the Philippines' economic profile, however, suggests a less impressive picture, whereby few major conglomerates and influential families have been swallowing much of the recently-created wealth, while poverty and underemployment figures have hardly improved. As for the Philippines government, there is also a significant absence of effective regulation, which explains, among other things, why the country has an underdeveloped infrastructure and one of the most expensive utility rates in the world - the two leading impediments to FDI.

The auspicious convergence

Conventionally, the Aquino administration's "good governance" initiatives are credited for sparking the Philippines' recent economic revival. Unlike any of his predecessors in recent memory, President Aquino has painstakingly campaigned for an end to the Philippines' age-old problem of corruption, which eroded public confidence in state institutions and undermined the country's public services.

Intent on eradicating corruption, the Aquino administration opted for the risky decision to take on one of the most powerful elements in the country, including leading senators in the Philippine legislature. So far, however, the government is yet to convict any major political figure on charges of corruption and abuse of public trust. And the ongoing investigations - increasingly scattered and unfocused - have snowballed into corruption-related allegations against Aquino's leading allies. In short, the government is grappling with a political quagmire.

There are other ways to explain the Philippines' recent economic boom. As far back as the mid-2000s, the Arroyo administration (2001-2010) undertooka series of macroeconomic reforms to stabilise state finances, moderate interest rates, and tame inflation. The reforms were partly a result of increasing pressure from external actors, particularly Washington, which were worried about the Philippines' fragile economic conditions. Given the Arroyo administration's lack of political legitimacy, which inspired growing protests by opposition forces and ordinary citizens, Washington feared the prospect of a political meltdown in the Philippines - a key Western ally in the (then) intensifying global "war on terror".

The 2007-08 recession, however, undermined the Philippines' ability to sustain above-average growth rates. Thanks to the steady influx of hard-earned remittances by millions of Filipino workers abroad and Business Process Outsourcing (BPO) investments, the Philippines was able to withstand external economic shocks better than most of its neighbours. And this created a virtuous cycle of robust domestic consumption, which allowed for the sustained expansion of the services sector. The Aquino administration's sincere and relatively steady leadership progressively enhanced business confidence in the country.

Then, an upsurge of Quantitative Easing (QE) in the West encouraged a massive inflow of foreign capital into emerging markets such as the Philippines, which offered increasingly attractive prospects amid the slowdown among leading developing countries such as India, Brazil, and Russia. In short, the Philippines' economic boom was a product of a synergistic dynamic among varying domestic and external factors.

The development deficit

The problem, however, is that the Philippines' economic boom is far from inclusive. The newfound wealth in the country is hardly trickling down to those, who need it the most. This is by no means unique to the Philippines, since most emerging markets have been suffering from a similar dynamic.

In the last decade, poverty and underemployment rates have remained inelastic. The Aquino administration has tried to address this issue by reviewing labour market conditions as well as expanding Conditional Cash Transfer (CCT) schemes, which provide financial support to indigent communities in exchange for regular schooling and better health monitoring for their children.

But the reason behind the Philippines' inability to create inclusive growth is largely structural. The common mistake among many (agricultural) developing countries is the (erroneous) belief that they can create sustainable development without going through a period of robust industrialisation and genuine land reform.

Asia's leading industrialised countries - namely Japan, South Korea, Taiwan, which were previously known as "tiger economies" - were able to sustain decades of breakneck economic growth, precisely because they had pro-active industrial policies, which provided large-scale, well-paying jobs to the majority of the population in the booming manufacturing sectors. Effective land reform schemes, meanwhile, created a dynamic agricultural sector, which ensured more egalitarian income distribution and provided support mechanisms for urban centres. The product was a huge domestic middle class, which served as the foundation of successful industrialised democracies.

In the case of the Philippines, low- and medium-end services dominate the economy, benefiting speculative and/or consumption-driven real estate and retail conglomerates. Meanwhile, the manufacturing and agricultural sectors have suffered from lack of effective land reform and absence of any discernible industrial policy.

The product is one of the Asia's most unequal societies, where about 40 families control up to 76 percent of the national economy. Weak regulatory agencies coupled with the aggressive privatisationof strategic sectors such as electricity have created prohibitive utility costs, which has discouraged greenfield investments from major multinational companies. Corruption scandals and legal-regulatory uncertainty, meanwhile, have undermined the Aquino administration's efforts to finalise even a single big-ticket infrastructure project to this date.

Overall, what is increasingly clear is that the Philippines has managed to become a rapidly-growing economy. But to achieve sustainable development, it will need a political administration, which is focused on effective governance and the enhancement of the regulatory capacities and developmental policies of the state, especially with respect to manufacturing and land reform.

Richard Javad Heydarian is a specialist on Asian geopolitical/economic affairs and author of "How Capitalism Failed the Arab World: The Economic Roots and Precarious Future of the Middle East Uprisings".