Slide1: International Trade and the Philippine Economy A presentation to Roberto Galang Asian Institute of Management February 2006


Understandingthe Philippines: Understanding the Philippines


The Philippines : The Philippines Poor country Left behind by its neighbors Diminishing currency Mainly agricultural Unequal distribution of income


GDP Per Capita Ranking of 160 World Bank Member Countries: GDP Per Capita Ranking of 160 World Bank Member Countries Source: World Bank US$ Per Capita


Average GDP Per Capita In Selected Asian Countries, 1960: Average GDP Per Capita In Selected Asian Countries, 1960 Source: United Nations University US$ Per Capita


Average GDP Per Capita In Selected Asian Countries, 1987: Average GDP Per Capita In Selected Asian Countries, 1987 Source: United Nations University US$ Per Capita


Philippine Peso-US Dollar Exchange Rate: Philippine Peso-US Dollar Exchange Rate Source: NSCB, BSP Pesos Per US Dollar


The Philippines : The Philippines Primarily a services economy 4th largest exporter of IT-enabled services after India, Canada and Ireland 4th largest exporter of notebook PCs and DVD-ROMs 5th largest exporter of disk drives


GINI Inequality Index for Selected Countries: GINI Inequality Index for Selected Countries Source: World Bank


Philippine Social Indicators: Philippine Social Indicators Source: World Bank


Economics 101: Economics 101


Definition of Economic Terms : Definition of Economic Terms Measures of Economic Performance: Gross Domestic Product (GDP) Value of all goods and services produced in an economy Consumption + Investment + Government Expenditure + Exports - Imports Gross National Product (GNP) Value of all goods and services produced by ‘nationals’ of a country Excludes foreigners and foreign corporations in the Philippines; includes Filipino corporations and Filipinos abroad GDP Per Capita


Average GDP Per Capita In Selected Asian Countries, 2004: Average GDP Per Capita In Selected Asian Countries, 2004 Source: World Competitiveness Yearbook US$ Per Capita


Definition of Economic Terms : Definition of Economic Terms Measures of Economic Performance: GDP Growth Boom or growth Recession: decline in GDP for two quarters Depression


Average Annual GDP Growth Rates In Selected Asian Countries: Average Annual GDP Growth Rates In Selected Asian Countries Source: UNDP Percentage Growth Rates


Average Annual GDP Growth Rate Rankings In Selected Asian Countries: Average Annual GDP Growth Rate Rankings In Selected Asian Countries Source: UNDP Ranking


Definition of Economic Terms : Definition of Economic Terms Inflation Continuing rise in the general level of prices of goods and services Measured via periodic changes to the consumer price index Consumer Price Index (CPI) General price level of a market basket of goods in an economy


Definition of Economic Terms : Definition of Economic Terms CPI Components Inflation Drivers World oil prices Philippine Peso-US Dollar devaluation


Inflation Rates in the Philippines: Inflation Rates in the Philippines Source: BSP


Definition of Economic Terms : Definition of Economic Terms Hyperinflation Deflation Continuing DECLINE in the general level of prices of goods and services Unemployment Rate Number of unemployed people in labor force Excludes people not looking for work Obtained via survey


Unemployment Rates in Selected Asian Countries, 2005: Unemployment Rates in Selected Asian Countries, 2005 Source: BSP


Philippine Historical Economic Performance : Philippine Historical Economic Performance


Philippine Industrial Regimes: Philippine Industrial Regimes Free Trade with United States 1946-1949 Import Substitution via Exchange Controls 1949-1960 Decontrol 1960-1965 Trade Protection 1965-1970 Export Promotion w Trade Protection 1970-1986 Trade Liberalization 1986-Present


Historical Philippine GDP Growth Rates: Historical Philippine GDP Growth Rates Default Asian Crisis Import Substitution Martial Law Decontrol Trade Protection Trade Liberalization Blackouts Growth Rate Source: NSCB


Trade Protection or Trade Liberalization: Trade Protection or Trade Liberalization Import Substitution Trade Protection Decontrol Trade Liberalization Growth Rate Source: NSCB Average 3.83


Democracy vs. Dictatorship: Democracy vs. Dictatorship Third Republic Martial Law Post EDSA I Growth Rate Source: NSCB Average 3.44 Average 3.82


Historical Philippine GDP Growth Rates by Philippine President: Historical Philippine GDP Growth Rates by Philippine President Source: NSCB 5.02%


Philippine Historical Inflation Rates: Philippine Historical Inflation Rates Source: NSCB Oil Crisis Iran-Iraq War Gulf War Rising Oil Prices


Philippine Electricity Mix : Philippine Electricity Mix Source: DOE 1973 1998


Philippine Electricity Mix : Philippine Electricity Mix Source: DOE 1973 2004


Electricity Costs for Industrial Use: Electricity Costs for Industrial Use Source: World Competitiveness Yearbook US$ per kilowatt hour Average: .071


Philippine Peso-US Dollar Exchange Rate: Philippine Peso-US Dollar Exchange Rate Source: NSCB, BSP Pesos Per US Dollar Decontrol Marcos Re-Election Aquino Assassination / Debt Default Asian Crisis EDSA II


Philippine GDP Growth Performance vs. Peso – Dollar Exchange Rate: Philippine GDP Growth Performance vs. Peso – Dollar Exchange Rate Growth Rate Source: NSCB Default Balance of Payments Crisis Asian Crisis Power Crisis Marcos Re-Election EDSA II


Philippine Historical Inflation Rates: Philippine Historical Inflation Rates Source: NSCB Oil Crisis Iran-Iraq War Gulf War Rising Oil Prices 20:1 40:1 4:1 6:1 Annual Inflation Rates


No Longer a Banana Republic: No Longer a Banana Republic


Definition of Economic Terms : Definition of Economic Terms Components of an Economy: Agriculture Agriculture, Forestry, Fisheries Industry Mining, Manufacturing, Utilities, Construction Services Trade, Hotel & Restaurant, Transport & Communication, Real Estate, Finance, Health, Education, Government


Sectoral Share of Philippine Economy: Sectoral Share of Philippine Economy Source: World Bank


Definition of Economic Terms : Definition of Economic Terms Exports as Engine of Growth: Example of Japan, Korea, Taiwan and other Asian countries Gains from Trade: Expands market size Entry of technology / finance from abroad Sound policies and institutions More competitive markets


Historical Total Philippine Exports: Historical Total Philippine Exports Source: NSCB In Millions of US Dollars Marcos Export Promotion


Structure of Philippine Exports : Structure of Philippine Exports Source: NSCB 1970 1980


Definition of Economic Terms : Definition of Economic Terms Components of an Economy: Agriculture vs. Industry Price volatility Production risk Decreasing relative prices


Historical Total Philippine Exports: Historical Total Philippine Exports Source: NSCB In Millions of US Dollars Ramos Export Promotion


Philippine Exports, Electronics and Non-Electronics Exports: Philippine Exports, Electronics and Non-Electronics Exports Source: DTI In Billions of US Dollars


Structure of Philippine Exports : Structure of Philippine Exports Source: NSCB 1970 2004


Definition of Economic Terms : Definition of Economic Terms Components of an Economy: Industry vs. Services Skills intensive Scalability


Employment in Business Process and Information Technology Outsourcing: Employment in Business Process and Information Technology Outsourcing Source: BPA/P In Thousands of Persons Employed


Top Philippine Export Commodities, 2004: Top Philippine Export Commodities, 2004 Source: World Competitiveness Yearbook In Billions of US dollars ~ ~ 26 24


Philippine Tourist Arrivals: Philippine Tourist Arrivals Source: World Bank, Department of Tourism In Thousands of Tourists


Top Philippine Export Commodities, 2004: Top Philippine Export Commodities, 2004 Source: World Competitiveness Yearbook In Billions of US dollars ~ ~ 26 24 BPO / IT 2005


Remittances from Overseas Filipino Workers : Remittances from Overseas Filipino Workers Source: BSP In Millions of US$ 28% of Total Exports


Remittances from Overseas Filipino Workers : Remittances from Overseas Filipino Workers Source: POEA, BSP OFW Population Total Remittance


Other Potential Growth Drivers : Other Potential Growth Drivers Fashion design Furniture design and manufacture Education


A Land without Tax Payers: A Land without Tax Payers


Fiscal Policies: Fiscal Policies Fiscal policy is reflected through the government’s expenditure, tax and borrowing activities Balanced budget: a situation where government revenue = government expenditure Budget deficit: government spending > government revenue Budget surplus: government spending < government revenue


Tax Incidence in Selected Asian Countries, 2003: Tax Incidence in Selected Asian Countries, 2003 Source: World Competitiveness Yearbook Tax Revenue as Percentage of GDP Average: 17.1


Tax Incidence: Tax Incidence Source: NSCB Tax Revenues / GDP Ramos Reforms Martial Law


Philippines Government Budget Surplus (Deficit): Philippines Government Budget Surplus (Deficit) Source: ADB, UNDP, PIDS In Billions of Philippine Pesos


Philippines Government Budget Surplus (Deficit) with Privatization Receipts: Philippines Government Budget Surplus (Deficit) with Privatization Receipts Source: ADB, UNDP, PIDS In Billions of Philippine Pesos


Philippine Long-Term Debts: Philippine Long-Term Debts Source: World Bank In Millions of US Dollars


Comparative Infrastructure and Social Spending: Comparative Infrastructure and Social Spending Source: World Bank


Burocracia Republic: Burocracia Republic


Number of Days to Start a Business in Selected Asian Countries: Number of Days to Start a Business in Selected Asian Countries Source: World Bank


Number of Years to Close a Business in Selected Asian Countries: Number of Years to Close a Business in Selected Asian Countries Source: World Bank


Number of Days to Enforce a Contract in Selected Asian Countries: Number of Days to Enforce a Contract in Selected Asian Countries Source: World Bank


Some Imperatives for Philippine Economic Takeoff : Some Imperatives for Philippine Economic Takeoff Services growth requires education and English language skills Tax collection! Eliminate red tape Certainty of policies


Slide66: International Trade and the Philippine Economy A presentation to Roberto Galang Asian Institute of Management February 2006