[Editorials of the Connection] APEC and the PHL economy’s homework

 

A rare occasion, the meeting of state leaders of the member-economies of the Asia-Pacific Economic Cooperation (APEC) network, will happen in an emerging economy from November 18 to 19. APEC 2015 marks the second time the Philippines is hosting this meeting. (It can be remembered the country hosted APEC in 1996, at a time the economy was booming.)

APEC leaders during the 2014 APEC Summit (photo posted at the APEC website by Xinhua)

APEC leaders during the 2014 APEC Summit (photo posted at the APEC website by Xinhua)

APEC is, like many other bands of countries in other regions of the world, a trade bloc that is a response to globalization. APEC’s aim is to entice more trade between and among developed and developing countries, especially by reducing tariff (the tax on imports and exports). Gentle pressure from fellow member-countries will also make APEC members improve their business climates so as to bolster their economic competitiveness. Interestingly, even customs procedures are an agenda of APEC.

A 2005 article by the British Broadcasting Corp. listed APEC as one of the world’s five main trade blocs. The others are the European Union, the North American Free Trade Agreement (NAFTA), the G20 or Group of 20 developing economies, and the Cairns Group of agricultural exporting economies. The Philippines is in APEC, the G20 and the Cairns Group.

So for the ordinary citizen, APEC —21 Pacific Rim countries, 2.8 billion people, US$31 trillion in combined real gross domestic product (GDP), and US$22 trillion in total trade of goods and services— is economics. As well, soft persuasion between and among countries is a trait of APEC leaders’ meetings; leaders cannot force something upon themselves in respect of countries’ sovereignty. Reducing tariff entails sweet talking skills between leaders.

A criticism of APEC is its continued relevance. Members China and the United States have their own trading agendas: China with the New Silk Road bloc (a three-continent loop that aims to connect countries by railway to facilitate trade) and the United States with its Trans-Pacific Partnership or TPP (a free trade area between nine Pacific Rim countries —all APEC members). One wonders if APEC remains a visible trading bloc, given the work of existing trade blocs and the emergence of new trading coalitions (like the Association of Southeast Asian Nations or Asean) that have APEC members on these.

Trade blocs are also an arena where member-countries’ citizens ask the tangible benefits of these. In broad strokes, political and business leaders at APEC talk about more trade that leads to more businesses, to more jobs and, inevitably, additional contributions to economic growth (hopefully reducing poverty). APEC, it is to be noted, is just among the opportunities countries maximize because of globalization’s gains to individual countries.

This is where one wonders if the Philippines, since it last hosted APEC in 1996, had indeed gained. Trade between and among the Philippines and APEC countries might have gained in some way. A visible example here would be Japan: go to Batangas province and see the recent waves of Japanese companies setting up factories at Batangas’ economic zones, with the aid of tax shelter perks. On one end, Filipinos from that province and nearby provinces access job opportunities. We would wish this arrangement spreads to other Philippine regions. On the other hand, these Japanese firms went to the Philippines not primarily because of APEC. Labor costs in China have shot up, and the Philippines is an “attractive” destination.

Until now, the Philippines still has yet to formalize a new industrial policy that will give our manufacturing sector a big boost. Since the mid-1980s, manufacturing’s share to Philippine GDP has been stagnant (at around 27-to-32 percent).  And surprising of a government that has made anti-corruption a major agenda, weeding out corruption as a barrier to economic activities is met by a blank wall: stale manufacturing. Still, “Philippine-made products” ringing a bell worldwide remain a mystery (what are they, anyway?). Amid APEC’s prodding of freer trade, Philippine industrial policy —or the absence of it— did not ride along “APEC-induced” trading.

And of course, the never-ending issue of improving the Philippines’ business climate prevails. To be fair to the government, even the Department of the Interior and Local Government (DILG) and the National Competitiveness Council (NCC) have joined the fray in encouraging local governments to make their localities investment-friendly. But these ongoing efforts are not enough. It is still a long, long way to go for the Philippines to have a more competitive business climate and rank in the top 50 of the World Bank’s Doing Business Surveys. Bottlenecks in infrastructure (example: Metro Manila’s traffic, airport congestion, decrepit farm-to-market roads) have even emerged as business climate issues.

The Philippines is now in an economic sweet spot globally. Who would think Philippine economic growth is now among APEC 2015 logothe world’s best? Amid visible barriers to local economic growth such as stale manufacturing and business climate bottlenecks, the Philippine economy grew. This year’s hosting of APEC is a bonus.

But what gives after APEC, and after the regime of President Benigno Simeon Aquino III? What gives is that the national government, whoever heads it, may continue to have a lot of cleaning up to do. Trade will only be a factor to what the Philippines calls as “inclusive growth” if the country’s stale reform agendas for trade and business activities are achieved quickly —and ordinary Filipinos are transparently told about these developments.

After APEC in 1996, and no thanks to the 1997 Asian financial crisis, the Philippine economy went downhill. We hope déjà vu does not happen after APEC 2015 in Manila. So our backyard better be fixed soonest, this being a nation’s and her leaders’ and citizens’ collective agenda. Only then will outside forces like the Asia-Pacific Economic Cooperation trade bloc feel their impact on the world’s fastest-rising emerging economy, the Philippines.

 

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