Abac survey: Globalization

In a previous column, I spoke about the perception that our trade policy seems to be an afterthought and not a central tenet of our economic growth strategy, let alone an inclusive one where all sectors of society benefit.

A survey commissioned by the APEC Business Advisory Council (ABAC) of how APEC economies are spreading the benefits of globalization and facing future challenges seems to support this perception. The survey was conducted in response to the rise of anti-globalization rhetoric and increasing protectionist actions such as the one we are witnessing now between the US and its major trading partners.

In the case of the Philippines, it concluded that while committed to “technological progress, globalization, and free trade, with minimal risk in reversion in trade outlook, the adjustment program implementation needs improvement.”

The survey is premised on the conviction that “no economy in modern times has sustained economic growth without harnessing the benefits of globalization, trade, and technological progress. These forces have lifted living standards and created measurable benefits for all stakeholders. Individuals and households have enjoyed greater consumer choice, faster access to information, and lower priced goods. Businesses have found greater competitiveness, access to emerging markets, as well as stronger cross-fertilization of technology and innovation. Governments have seen amplified economic growth, better utilization of resources, and enhanced economic development, especially for developing economies.”

Survey metrics

The survey employed several metrics including the  following: the extent of anti-globalization sentiment; the existence of a strong inclusivity oriented agenda across both the public and private sectors; understanding of   how globalization, international trade, and technological progress impacts their daily lives;  effectiveness of adjustment programs for labor; the level of trust in government policy-making and thinking towards the future;  trust in business engagement to inclusion; the willingness of business to engage in inclusive growth oriented action; and preparedness for future challenges from technology disruptions and new business models.

Findings on Phl

All sectors of the Philippine society are generally positive towards globalization. However, the costs and consequences of globalization and technological progress have not been effectively managed resulting in a rise in income inequality and limited access to opportunities.

Government has done a poor job of communicating the benefits of globalization. Adjustment programs have not been found to be satisfactory and they tend to be for specific sectors only and “aren’t very clear or popular.” Although tripartite discussions have been conducted about adjustment policies, labor is still uncertain whether their jobs will not be displaced and whether government will create such programs.

People distrust business capabilities to foster inclusive growth, noting the big gap between the rich and poor. Business, in turn, are aware of the benefits of openness and “want to let them trickle down to employees and labor unions.” In terms of preparing for future challenges, the view is that the Philippines is far behind in terms of infrastructure and providing connectivity such that it will be hard to catch up with fast developments.

Despite these misgivings, social discontent is slight and there is a relatively low chance of opposition rising against globalization, trade, and technological progress. The survey also pointed out that one of the biggest fears is that the BPO/call centers become automated, possibly triggering protests.

Future challenges and solutions

The respondents to the survey also identified the top three future challenges to the economy as the likelihood of restrictions on the movement of people since the Philippines depends a lot on its overseas remittances; the increasing use of non-tariff barriers against Philippine exports, and the response to the advent of the Fourth Industrial Revolution. In terms of solutions, they prioritized education, particularly towards critical thinking, an enabling business ecosystem that supports start-ups and entrepreneurs, and “more effective means of communicating the benefits of trade, globalization, and technological progress.”

There are also more sobering findings regarding how the Philippines ranks within the 21 member economies of APEC. In terms of Ease of Doing Business, we rank second to last. In basic and digital infrastructure we are 17th and in small business ownership we are 17th. On the inclusion index, in terms of wealth distribution, we are ranked 13th, and in terms of the percentage of GDP spent on social protection, 17th.

Conclusion

We should take heart in the fact that as a nation and as a people we are pretty open to globalization and technological progress. However, we should be concerned that we are a long way off from being prepared for the consequences of and ability to profit from them. On this score, our ASEAN neighbors, just as they have in international economic engagement, are ahead of us. We should not be content that we have one of the fastest growing economies in Asia because that may prove illusory and unsustainable long term. Much of it is fueled by consumption on the back of strong remittances from our overseas workers, which clearly carries risks as much as automation is threatening our BPO and call center industry.

Second anniversary: Hague decision

July 12 marks the second anniversary of the landmark ruling of the Permanent Court of Arbitration in a case brought to it by the Philippines as a party to the UN Convention against another party to that convention – China. The court concluded that under international law, no one can claim sovereignty over the entirety of the South China Sea or more specifically, the area covered by the so-called Nine-dash line because of the fact that the geographic features do not justify the existence of overlapping extended territorial seas and EEZs.  Moreover, it confirmed the right of the Philippines to exercise economic stewardship of all areas falling within its Exclusive Economic Zone (EEZ). The ruling was stunning in its simplicity and its import without touching on the issue of sovereignty. It would have been a potent weapon in the court of world opinion to enjoin all claimants to behave and to prod them to the table to seek a solution under a rules-based system. Alas, it never got the opportunity to be tested and each passing day will make it less and less relevant to the situation prevailing on the ground. As many cynics amongst the Filipino intelligentsia would say, “what do you need the grass for when the horse is dead.”