• Globalisation and the Philippines

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    Many years ago, I was a director of a business radio network in the USA. In those days I was based in the UK and used frequently to hop over to Colorado, New York and Chicago to do my inputs for development of the business of the network. The network was one of several entrepreneurial businesses that we used to advise. Since then I have rather lost touch with the USA and its business culture.

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    Recently, I was again reminded of the US business culture through being made aware of a couple of entrepreneurial startups, 35 and 90 years ago, respectively, which were successful and which have grown in size with the older one—a construction company now employing over 20,000 people and having an annual turnover of US$4 billion.

    What really struck me about this entrepreneurial success story was that its business growth had been entirely through work domestically in the USA, with no need of support through contracting outside the USA. This is just one of so many business successes started by individuals and grown big purely on the strength of the domestic US market of 323 million people and a GDP of US$19 trillion.

    The antiglobalization people would say that given the capacity of the USA in terms of people, infrastructure and technology, and the size and wealth of the market, then why would American firms manufacture in China or outsource jobs to places like India and the Philippines? The quick answer is, of course because its cheaper to make stuff where labour costs are lower or where there are people readily available and eager for employment to do fairly low-skilled call-centre type work. Manufacture in a cheap place, sell in a wealthy place, bigger returns for shareholders. Fewer jobs for Americans, who are more expensive, anyway. Why would a manufacturer, regardless of savings in the cost of production, sell for a price much lower than the market would bear?

    Reducing globalisation is not good news for the Philippines, or for that matter, for China or the other less developed economies, which have been saved from having to address even more unemployment thanks to the realisation that companies from the developed economies are very useful sources of job creation. The largely foreign invested semiconductor manufacturing business in the Philippines employs about 2.2 million people and contributes 8 percent or 9 percent of GDP, the foreign invested BPO sector employs about a million people and growing, and contributes about 6 percent of GDP. There are 10 million Filipinos living and working abroad and officially remitting about US$30 million a year, which is probably more like 40-50 million a year if unofficial contributions [people personally carrying cash etc]are also taken into account. The value of globalisation, which should also include the remittances to the Philippines from Filipinos working overseas by this rather superficial count, is US$83 billion a year, or 28 percent of GDP. It also accounts for about 13 million family livelihoods, over half the population!

    The dependence of the Philippines on other economies of the world is enormous and will continue to be so until such time as the Philippines can generate sufficient jobs from its domestic economy to provide decent livelihoods for all its citizens. If semiconductor and BPO jobs went to other countries in order to provide employment to nationals of those countries and if the international movement of labour were to be restricted for nationalist policies, then the Philippines would be in difficulties.

    The main beneficiaries of globalisation policies are the less developed economies, because it provides employment opportunities and the shareholders of the corporations, which carry out their manufacturing or service provision on a global basis. Philippine economic growth is largely driven by increasing consumption, a significant part of which is of goods manufactured overseas; domestic manufacture does not feed the higher end or much of the gadget market, and consumers continue to revere imported items.

    Australia has a very prevalent nationalistic view on goods—“proudly made in Australia” is often a slogan on lots of things, from shirts to butter. Often even ordinary Australians would try to ensure before committing to an expenditure that the targeted item had, in fact, been made in Australia. Similar sentiments prevail in the USA.
    There are some domestically manufactured consumer items: My Phone, Starmobile and the Aurelio sports car, which look as attractive as any imported item and which are “proudly made in the Philippines”, but they have small market shares and I doubt they have much of an export market. There is a long way to go before the Philippines could ever consider the growing antiglobalisation sentiment as anything other than a major economic danger. Meantime, the Philippines must be very conscious of its economic dependency on the rest of the world and the developed economies in particular.

    Mike can be contacted at mawootton@gmail.com

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