Philippines’ competitiveness and global financial meltdown : a question of Japan’s role (original) (raw)
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The Philippines in the global trading environment: looking back and the road ahead
Philippine Institute for Development Studies (PIDS) …, 2002
Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas The PIDS Discussion Paper Series constitutes studies that are preliminary and subject to further revisions. They are being circulated in a limited number of copies only for purposes of soliciting comments and suggestions for further refinements. The studies under the Series are unedited and unreviewed. The views and opinions expressed are those of the author(s) and do not necessarily reflect those of the Institute. Not for quotation without permission from the author(s) and the Institute.
Japan and the Philippines' Lost Decade: Foreign Direct Investments and International Relations
The 1980s witnessed the economic transformation of many Southeast Asian economies but for the Philippines they were a lost decade in terms of economic growth. Arguably, external finance played a major differential role especially after the 1985 Plaza Accord when vast sums of foreign direct investments (FDI) flowed to Southeast Asia. In the case of the Philippines, external finance had been critical; to a large extent, her economic performance depended on funds from abroad. This dependence raises the importance of international relations to the country’s economic growth and sustenance. This study explores how international relations have affected financial flows, including Japanese FDI, to the Philippines during the1980s. It examines the period 1979-83 as a decisive period for the later distribution pattern of FDI flows. The argument is that FDI avoided the Philippines because 1) the domestic investment climate under the Marcos regime increasingly became inhospitable since 1979 and 2) Japan’s foreign policy and relations with other countries created a basis for Japanese FDI locational preferences later in the decade. The study revisits the 1983 balance-of-payments (BOP) crisis, which was a critical juncture in Philippine economic performance of the 1980s, if not of her long-term performance record. It proposes that the crisis represented the loss of international support to the Marcos regime. This loss of support produced serious complications that later resulted in the steep decline of the Philippine economy. The periods surrounding the 1983 crisis reflected conditions that made the country less attractive to FDI. Japan’s active involvement in Southeast Asia also became notable in the early 1980s. Japan’s foreign policy has been shaped by economic security considerations, which around 1980 included the economic and political stability of Southeast Asian countries. Particularly, world and regional events raised the strategic importance of countries along the Malacca Straits. The comprehensive security policy adopted meant that the “trilogy” of aid, trade, and FDI be stepped up in favour of these countries. Initial investments placed made these countries more attractive to Japanese FDI, particularly after the 1985 Plaza Accord.
2004
The Japan-Philippines Economic Partnership Agreement is envisioned to further boost Japan's ODA to the Philippines, particularly for capital formation in the infrastructure sector. It will stimulate an increase in investment and capital accumulation causing more employment opportunities to be created. Output capacity will expand and so with cost of production. Moreover, export volume will increase at lower prices, thus enhancing competitiveness in the world market. Trade and business facilitation particularly among Japanese firms in the Philippines will be further enhanced due to an improvement in infrastructure and other support services, for instance, farm-to-market roads, energy, power and telecommunication, irrigation and information technology. Potential economic gains on technical assistance and development cooperation for capacity-building in the fields of information and communication technology, science and technology, intellectual property, human resource development ...
The Challenges and Opportunities in China-Philippineeconomic Relationships
2004
and the Pacific China's opening up to the world since 1978 and its accession to the World Trade Organization (WTO) have raised questions on the trade and investment impact on other Asian developing countries, in particular, the ASEAN. It is conventional thinking that China poses very stiff competition to ASEAN in both areas. However, using a computable general equilibrium (CGE) model, Tongzon (2001) argued that China's entry into the WTO would generate net benefits to ASEAN. The growing regionalization of the world has also accelerated intensification of China-ASEAN relationships with the signing of a China-ASEAN Free Trade Area (CTA) agreement to culminate by 2010. Chiratvhivat (2002) presents evidence based on the same CGE model that, indeed, both China and ASEAN will be net beneficiaries of an FTA as cited in Laurenceson (2003). The popular perception of China as the 'super factory' has stoked considerable concern in both public and academic debate in the Philippines. This paper assesses how China's growing weight in the world markets will affect the Philippine's trading sector. Will China so dominate world export markets as to overshadow Philippine exports? Or, conversely, will China's emergence create opportunities for small countries, such as Philippines? In addition, the paper looks into the implications for the Philippines as a result of the massive inflows of foreign direct investments (FDI) to China. Does China 'crowd out' the Philippines? The analysis uses trade indices, such as the revealed comparative advantage (RCA) indices and draws on the findings of the empirical literature pertaining to the relationship between ASEAN and China. I. CHALLENGES AND OPPORTUNITIES FOR TRADE BETWEEN THE PHILIPPINES AND CHINA This first part of the paper examines how China's entry into the world merchandise markets will impact the Philippines' own trade record and prospects. We consider this issue from two aspects: (1) competition between the two countries in each other's markets and (2) competition between the two countries in third markets including the world in general and the specific major markets of the United States, Japan, and the European Union. Bilateral Trade Between China and the Philippines Prior to this, however, we look into the trade and investment intensity of the ASEAN countries with respect to China for the period 1996-2001 in Table 1 taken from Laurenceson (2003). He defines the "trade intensity ratio" as China's exports plus imports with the ASEAN5, divided by China's GDP (all in U.S. dollars). On the other hand, since FDI from China into the ASEAN5 is deemed small, the "investment intensity ratio" is just the FDI from the ASEAN5 into China divided by total FDI into China.
Trade, Competitiveness and Finance in the Philippine Manufacturing Sector, 1980-1995
1999
The PIDS Discussion Paper Series constitutes studies that are preliminary and subject to further revisions. They are being circulated in a limited number of copies only for purposes of soliciting comments and suggestions for further refinements. The studies under the Series are unedited and unreviewed. The views and opinions expressed are those of the author(s) and do not necessarily reflect those of the Institute. Not for quotation without permission from the author(s) and the Institute.
Asia's Turning Point: An Introduction to Asia's Dynamic Economies at the Dawn of the New Century
2009
Economic interdependence within the East Asian region is growing stronger and deeper. The countries of the region are expanding trade, investment, and other relations with one another much faster than with nations outside the region. Also, intraregional linkages acquire a new depth, because they are prompted by the division of labor within one industry and even one technological chain. Yet, for a number of reasons, America, Europe, and other nonregional partners remain decisively important for Asian economies. This importance, along with East Asia's diversity, makes it impossible and irrelevant for the region to think of an economic bloc with common import tariffs or other unifi ed rules regulating its members' relations with outsiders. East Asia sticks, and will stick, to the implicit "golden rule": not to push its trade and investment integration beyond Free Trade Agreement (FTA)/Economic Partnership Agreement (EPA) kinds of arrangements. These are open-ended forms of integration: such agreements can be concluded both between East Asian countries themselves and between them and nonregional counterparts. Trade Interdependence Table 6.1 presents the data on the share of intraregional trade in East Asia within different groupings. Within East Asia-10 its share is almost 55 percent, which is higher than in NAFTA and a bit lower than in the EU. The most rapidly growing share is within the East Asia-9 group: the four NIEs, ASEAN 4, and China. Tables 6.2 and 6.3 show the overall composition of exports and imports of the East Asia-9. While the proportion of trade within this group of countries, in both exports and imports, is increasing remarkably, the shares of the US and EU are declining, as well as the shares of East Asia's economic powerhouse, Japan. On the other hand, for Japan itself, the proportion of trade with its counterparts is on the rise, while the shares of the US and EU are falling (Tables 6.4 and 6.5). The data brings to light a number of important features of East Asia's intraregional trade. Unlike the US in North America or Germany, France, and other leading economies in Europe, Japan, Asia's leading economic power, is not providing the major market for other regional economies. In a way, Japan's "low import capacity" backfi res. It is rooted in the structural barriers posed by its complicated distribution channels and in the legacy of keiretsu-Japanese intercompany groups where domestic fi rms maintain long-term ties with one another, not letting outsiders in (Tselichtchev 2004, 40). Limits on trade with Japan enhance the importance of the markets in the US and Europe. In East Asia itself, the role of the major importer, as well as exporter, has gone to China. At this point, at least as far as trade is concerned, it has become the region's main integrator. The share of intraregional trade in the total trade of East Asian nations is increasing, fi rst and foremost, because the shares of their
Discussion Papers, 2004
Political conflicts among trading partners have changed their forms with ever-increasing flows of foreign direct investment. A decrease in the exports of Japan might merely be a reflection of a global production shift by Japanese multinational corporations. We investigate the effect of Japanese trade on the exports of other countries to the United States in the 1990s. In our sample we include eight Asian countries besides the US and Japan. With the trade data disaggregated at the HS 4-digit level, we regress the exports of an Asian country to the US on the Japanese exports to the US and the third-country, and the Japanese FDI to a third-country in a panel data specification. Among eight countries investigated, we find the evidence that Chinese and Japanese exports are substitutes in the US market while the exports of China to the US are partly promoted by Japanese FDI to China. The estimation result confirms a view that China competes vigorously with Japan in the US market while Japanese multinationals are adjusting their production bases to China in a process of reforming a new global production network.