The Pacific Basin is the fastest-growing region on Planet Earth. And one economy there offers the best combination of strong growth and solid finances, making the country invulnerable to a credit crunch. That country is the Philippines, which traditionally hasn’t ranked among the world’s top investment destinations.

That tradition is wrong and never more so than now, when a large population of working adults and a growing economy are improving the country’s living standards. Selling with a P/E ratio slightly below that of the United States, the Philippine stock market represents the most attractive investing opportunity currently in the Pacific Basin, which is why I have overweighted it somewhat in the Pacific Wealth Portfolio, with two holdings each in the Conservative and Aggressive portfolios (see sidebar).

From Kleptocracy to Free Markets

Of course, the Philippines wasn’t always such an exciting place to invest. In the 20th century, it shared little of the prosperity and dynamism of its regional neighbors Thailand and Malaysia, let alone that of wealthy Singapore. The Ferdinand Marcos dictatorship of the 1970s and 1980s was a kleptocracy, and after its departure the economy did little to inspire confidence.

Growth sputtered along at 3% to 4% in the 1980s and 1990s (4.1% between 1996 and 2005, according to IMF figures), which was not especially impressive on a per-capita basis given that the population grew 2% or more annually.

The Philippines is a democracy, but an oligarchic one, with a few families dominating politics and a confusion of mostly center-right parties. President Benigno Aquino III is the son of former President (1986–92) Cory Aquino, whose husband, Benigno Aquino Jr., was a senior politician whom the Marcos dictatorship killed in 1983.

Benigno’s grandfather and great grandfather were also prominent politicians, and his predecessor, Gloria Magapagal-Arroyo, was the daughter of a 1960s president. Traditionally in the United States, we looked askance at these family connections, but with our recent plethora of Bushes and Clintons, perhaps we have less to feel superior about. Aquino cannot succeed himself in the next presidential election on May 9, 2016; his vice president, Jejomar Binay, currently leads in the polls, and the country’s current free-market economic policies seem generally accepted.

The Demographics of Growth

Both Aquino and Arroyo emphasized economic growth during their presidencies, and it has accelerated. Arroyo’s term in office saw an average of 4.5% growth, higher than her three predecessors, and under Aquino it averaged a stellar 6.5% per annum between 2010 and 2014, a rate the IMF predicts will continue in 2015 and 2016.

Meanwhile, slower population growth of 1.8% is improving living standards, and if current trends continue, the Philippines will enjoy the favorable demographics of other fast-growing, middle-income economies, in which the number of working-age people increases while the school-age population stabilizes and the percentage of elderly remains small.

The Heritage Foundation’s Index of Economic Freedom ranks the Philippines 76th—above average in Asia and globally—its score having increased from 56 to 62 over the last four years under Aquino. For many years the main problem was corruption. Although Transparency International’s Corruption Perceptions Index ranks the Philippines only 85th of 175 countries, its score rose substantially under Aquino. Nevertheless, recent corruption trials against politicians are evidence of the country’s determination to clean up the problem.

The Philippine Advantage

Even though it is a poor country of 100 million people, the Philippines has an estimated GDP of $330 billion in 2015, but domestic purchasing power from low wages and prices more than doubles that figure. The country owes foreign lenders only $58 billion, less than 20% of GDP, and its budget deficit in 2015 should run at a modest 2% of GDP, according to The Economist’s forecasts.

The Philippines also runs a steady balance-of-payments surplus, exporting mainly electronic products (as part of the highly complex Asian supply chain) and transporting manufactured products, rather than commodities or energy. Not that it is lacking in the latter. Several huge mining projects are pending while the Philippine legislature revises the laws so that a central authority grants mining permits (mining company harassment by the country’s 81 provincial authorities has been common).

Those prospects support continuing rapid growth in the Philippines—the best in the Pacific Basin—in part because it’s easier for poor countries to grow faster than rich ones. As participants in global supply chains, countries with cheap workforces have the advantage.