Transcript Trade, Inclusive Growth and Inclusive Policy Making

Trade, Inclusive Growth and
Inclusive Policy Making
Ponciano Intal, Jr.
Overview
• Inclusive growth : broad-based, pro-poor
growth, growth with equity
• International trade promotive of inclusive
growth entails complementary measures in
both policy and institution building
• Promoted by inclusive policy making
• Benefit from expansion and deepening of
community based monitoring systems.
Benefits of International Trade
• International trade welfare enhancing overall.
• Globalizers grew faster, higher trade, higher
share of manufacturing to total employment and
output, and higher wage rates than nonglobalizers (WB; Rama)
• Trade key element of East Asian Miracle
• Trade: reference against global competitors,
impetus for greater efficiency, product quality,
supply reliability, creativity, organizational
adaptability.
Trade and Inclusive Growth:
Factors
• However, international trade not automatically
growth inclusive except with homogenous
factors and factor mobility between sectors
• Critical factors toward inclusive growth: (a)
Investment climate and investment rate; (b)
capability, infrastructure and access to skill
development; ( c ) agriculture volatility and
natural resources concentration; (d) quality of
institutions, regulatory climate and governance
Trade and Inclusive
Growth: Experiences
• Increasing inequality in high growth East
Asia (e.g., China)
• Sharp trade expansion with rise in poverty
incidence in some African countries; e.g.,
Madagascar, Burundi, Central Af Repblic
• Sharp rise and diversification in
manufactured exports but declining share
of manufacturing in total output and
employment (Philippines)
Trade and inclusive growth
• Any happy resolution bet. the globalization
demands of economic efficiency and the
imperative of social equity of inclusive growth?
• Rests on:
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quality of the investment response,
workings of the labor market and industrial relations,
overall macroeconomic environment, and
quality of government institutions and related policies,
among others.
Investment and Adjustment
• Effective restructuring and successful
adjustment involves investments.
• Investment rates(2006): RP-17%;
Thailand-23%; Vietnam-34%; China-43%.
• Wrenching adjustment in RP
manufacturing in tandem with low and
declining investment rate
• Improving investment climate and
performance key policy concern for RP
Investment Climate:
Determinants of FDI
• Regressed FDI to GDP ratio on selected
indicators in World Competitiveness Survey
2002-2006 for selected Asian countries
• Ratio increases if: GDP rises, school system
meets demands of competitive economy, lower
investment risk, more facilitative customs, lower
unit labor cost, currency depreciates, lower
bribery and corruption, better quality of the govt
bureaucracy, improved infrastructure
• Ratio decreases if: higher real domestic
interest rate
Determinants of FDI (cont’d)
• FDI influenced by quality of economic
governance, quality of institutions,
structural factors like quality of
infrastructure and educational system.
• Determinants of FDI above also echoed by
domestic investors
Improving Agri Productivity and
Transportation Links
• Robust agri productivity growth key factor plus rising labor intensive
manufactures for fast rate of poverty reduction in countries like
China, Vietnam, Indonesia (1980s) among recent success stories.
• Stagnant agri productivity, high population growth, poor rural roads
led to farmers as net food consumers and malnutrition in some
African countries.
• RP turned agri net importer, hurt poverty reduction
• Agri development central to pro-poor growth esp. in Africa. Good
roads important for farmers in hinterlands get access to main
domestic markets under open trade
• Good seeds, fertilizer, irrigation, R & D and farmer training important
for robust agri productivity & growth
Human capital, Safety net
• Improved human capital, labor –management
relations and basic social safety net in health
and education increase labor productivity and
mobility intersectorally and across skills, result to
smoother adjustment and support inclusive
growth.
• Rural education key factor for fast reduction in
poverty in China in 1980s
• Social cost of labor displacement high;
globalization raises firm “churning” and labor
displacement: hence, basic limited duration
basic safety net needed
Inclusive Policy Making
• Trade lib and inclusive growth not automatic. Needed:
pro-poor complementary measures that contribute to
competitiveness & productivity
• Inclusive policy making (IPM) facilitates effective propoor complementary measures
• IPM: explicit regard of impact of policies on
poor/marginalized groups, and enhance citizen
participation in governance
• Benefits: improved targeting and effective programs,
better citizen appreciation of trade offs, higher probability
of consensus and “win-win” solutions; better policies;
supports dynamic local leaders & cooperation with
various local stakeholders (Bulacan, Cebu as examples)
Community Based Monitoring System
• CBMS supports IPM thru on the ground
information useful for policy formulation, design
of programs and monitoring/evaluation of
impacts and effectiveness of policies and
programs
• Directly supportive of local governance
improvements
• Well designed system of designated CBMS
areas as “observation posts” allow monitoring of
impacts of national policies as well as structured
feedback on household responses to shocks
and national policies and programs.
CBMS (cont’d)
• Drive for inclusive growth in an open economy can come
from better targeted programs and more pro-poor
programs at the local level.
• CBMS contributes to improved resource allocation at the
local level.
• Example: Sta. Elena, Camarines Sur case: CBMS
digitized maps and data used as decision tools by local
officials (e.g., selection of scholars), raise budget of
social development fund, helped identify priority
barangays for water system and rural roads project
feasibility study proposals with funding from national
government.
• If similar cases multiply, then government expenditures
more effective and pro-poor (or growth inclusive).
Concluding Remarks
• Basic question raised: how can trade liberalization and
expansion be growth inclusive?
• Paper highlights importance of investment climate,
investing in people (with a bias for the poor and the
hitherto unskilled) and institutions, robust agricultural
productivity and good domestic transport links, basic and
limited-duration social safety nets in education and
health for inclusive growth in an open economy
• Inclusive policy making and CBMS contribute to effective
and pro-poor policies and [programs needed to make
trade expansion growth inclusive.