THE Philippines can be considered a negligible market despite being one of Asia’s fastest-growing economies and liberalization could be a means of achieving further expansion.
The first half’s 6.4 percent growth has been described as just behind perennial regional powerhouse China, outpacing other stalwarts such as Vietnam and India.
While the January-June result fell below the year’s 6.5-7.5 percent target, officials are confident that this will be met by even stronger growth in the last six months of the year.
But “compared to other markets, we are still a small market…moving towards development,” said University of Santo Tomas Professor (UST) Emmanuel Lopez, chairman of the Department of Economics.
Fellow professor Ramon Clarete, who hails from the University of the Philippines, said: “[In terms of trade performance], a lot more can be done. We could become a net exporter, rather than a net importer, and those things can be done by [further opening]our country to international trade.”
Both agree that in terms of overall trade policy, not much has changed since President Rodrigo Duterte took power last year.
While Duterte may moved to engage with China and Russia in an apparent shift from traditional markets such as the United States and the European Union, Clarete said the policy remained that of “ engaging the world through trade agreements.”
“Even though we are open, the attitude is still pretty much protective of domestic industries,” the UP professor added.
This protectionism is especially evident in the agricultural industry, where “we don’t want importation of raw materials in agriculture and food because we think we have that here, but we don’t really have that here in that kind of quantity and quality.”
Clarete claimed that that to be a successful exporter, areas that currently enjoy protection from outside competition need to be opend up.
“[I] look at the data, [and see that]the successful exporters in agriculture and food in the region are the big importers of agriculture and food,” he said.
The World Bank has also noted that the Philippines’ export basket hasn’t substantially changes over the past decade. Compared to China, which ships a wide range of goods abroad, the Philippines remains limited to electronics – a commodity vulnerable to volatility – along with textiles and apparel, and agricultural products and food.
“In order to become more competitive and considered as an industrialized country … dapat diverse ang export natin (we need to diversify our exports),” Lopez said.
“Masyadong limited ang export market natin [we have a very limited export market], so we have to diversify and include other products as well.”
Moreover, diversification is necessary to limit the impact from market disruptions.
“It is very risky if you have a concentration in one line of exports,” Clarete said..
If for example, a disruption in trade occurs between the United States and China due to tensions, an immediate casualty would be the global value chain for electronics – a product the Philippines has come to depend on for most of its export revenues.
Dave Almarinez, president of the state-owned Philippine International Trading Corporation (PITC), says liberalization is on the government agenda. However, the lack of capacity is a problem and high standards set by importing states are added hurdles.
Lopez said a push for technological innovations would help and allowing technology transfers were possible solutions.
Similarly, Clarete said the Philippines ought to commercialize its technologies and this can be done with the the help of foreign investments.
“You have to be open to investors in order to translate ideas of innovation into actual businesses,” he said.
Almarinez agreed, saying: “In order for us to be able to compete, we need to elevate [our]level of technology and competitiveness where the global market should be. We’re in a highly competitive global environment so we have to be in that level.”
While Lopez said that the Philippines may not be ready for globalization, “we cannot do anything about it because it is here already so there’s no other course but to compete…Otherwise, we’re going to be eaten up by globalization and relegated to the background.”
The country is ready to go up the production ladder knowledge- and capability-wise, both the UP and UST professors claimed.
“What is missing is investments,” Clarete said.
Lopez was more critical, claiming “we don’t have the government incentive or government initiative or financing to help other people improve…”.
Almarinez insisted, however, that “we have set our targets…and [are]hitting those targets.”
“Di pa natin nararamdaman (we may not be feeling it now) but eventually, in a short period like 1 to 2 years from now, mararamdaman natin ‘yun [we’ll feel it] if we play our cards right.”