Transcript Globalization and Competition: The World Scenario and

Globalization and Competition:
The World Scenario and
Philippine Realities
36 PMAP National Conference
Waterfront Hotel, Lahug, Cebu City
September 27-30, 2000
Dr. Victor S. Limlingan
Professor
Asian Institute of Management
1
Outline
I.
II.
III.
IV.
V.
Basic Premises
The World Scenario
Philippine Realities
Policy Analysis
Policy Recommendations
2
Basic Premises: Definition

Globalization is defined as the creation of a global
economy that enables any entrepreneur to raise
money anywhere in the world and, with that
money to use technology, communications,
management, and labor located anywhere the
entrepreneur finds them to make things anywhere
he or she wants and sell them anywhere there are
customers
• (Global Squeeze: The Coming Crisis for First-World Nations by
Richard C. Longworth)
3
Basic Premises: Status
 We
are not yet a global economy but
are moving towards one in three
different areas at different paces
• Globalization of Capital
• Globalization of Trade
• Globalization of Labor
4
World Scenario: Capital
Foreign
Direct Investments
Private Capital Flows
5
Gross Foreign Direct Investment
% of Purchasing Power Parity (PPP) Gross
Domestic Product (GDP)
4
3.8
3.5
3
2.5
2
1988
1998
1.7
1.5
1.3
1
0.4
0.5
0.5
0.7
0
World
Asia Pacific
Philippines
Source: 2000 World Development Indicators, World Bank
6
Gross Private Capital Flows
% of Purchasing Power Parity (PPP) Gross
Domestic Product (GDP)
16
14.5
14
12
10
8
1988
1998
6.9
6
4
4
1.3
2
3.6
1.3
0
World
Asia Pacific
Philippines
Source: 2000 World Development Indicators, World Bank
7
World Scenario: Trade
Growth
of World Trade
World Trade Organization after
Seattle
8
International Trade
% of Gross Domestic Product (GDP)
120
116
100
80
75
60
40
45
28
20
43
1988
1998
24
0
World
Asia Pacific
Philippines
Source: 2000 World Development Indicators, World Bank
9
WTO Annual Report 2000

Notwithstanding the Outcome of WTO’s Third
Ministerial Conference in Seattle, the state of
the world trading environment remained
generally sound in 1999. There has been no
major trade policy reversals during the year,
and there is no evidence of a resort to
protectionist policy. On the contrary, a number
of countries have undertaken concrete
measures to further liberalize their economic
and trade regimes.
10
World Scenario: Labor
Labor
Force Growth
Workers without Frontiers
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Growth in World Labor Force
Average Annual Growth
USA
Japan
Germany
Asia Pacific
Philippines
1980-98
1.3%
1.0%
0.5%
2.0%
2.9%
1998-2010
0.9%
-0.3%
-0.2%
1.1%
2.4%
Source: 2000 World Development Indicators, World Bank12
Workers without frontiers - The impact of
globalization on international migration, by Peter
Stalker, ILO Geneva

Far from reducing international migration
flows - by moving products instead of people globalization will give rise to increased
migration pressures in the years ahead. A new
book published by the ILO - Workers without
Frontiers: The impact of globalization on
international migration - argues that flows of
goods and capital between rich and poor
countries will not be large enough to offset the
needs for employment in poorer countries.
13
Workers without frontiers - The impact of
globalization on international migration, by Peter
Stalker, ILO Geneva


The total number of migrants around the world now
surpasses 120 million - up from 75 million in 1965 - and
continues to grow.
The book finds that falling prices for transportation
and the increased speed of communication have
changed the character of international migration,
making it much less a permanent move. By 1990, air
transport costs per mile had dropped to 20 per cent of
their 1930 level. Between 1930 and 1996, the cost of a
three-minute telephone conversation between London
and New York fell from US$300 to US$1.
14
Basic Premises: Implications

Intense Competition follows necessarily
from globalization as
• There are many more players
• There are fewer barriers to entry
• There is less government can do to
favor its nationals
• There is more multinationals can do
15
Basic Premises: Architecture
 Post-Cold War
Era has removed political
divisions and tensions
 Capitalism has emerged as the
commanding economic ideology
 Technological advances in
Computerization, Telecommunication
and Transportation has made the world
smaller
16
Philippine Realities
Need for Foreign Capital
 Savings Rate of Philippines compared to
other ASEAN Countries
 Foreign Direct Investments in Philippines
compared to other ASEAN Countries
17
Low Savings Rate
Compared to Other ASEAN Countries (1997)
Singapore
Indonesia
Malaysia
Thailand
56.4%
38.5%
38.0%
35.0%
Philippines
16.9%
Source: NEDA
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Low Inward FDI Flows compared to Other
ASEAN Countries (Million US Dollars)
COUNTRY
1992
1993
1994
1995
1996
1997
1998
Singapore
4,887
2,204
4,686
6,550
7,206
7,884
9,710
7,218
Thailand
2,030
2,114
1,805
1,364
2,068
2,336
3,733
6,969
Malaysia
3,996
5,183
5,006
4,342
4,178
5,078
5,106
3,727
228
1,236
1,591
1,478
1,517
1,222
1,713
1,482
1,777
2,004
2,109
4,346
6,194
4,673
Philippines
Indonesia
1991
544
Source: Department of Trade and Industry
-356
Philippine Realities:
Improved Export Performance
Year
World
1980 $ 2,034 b
Philippines
% Share
$ 5.74 b
0.2034 %
1985
1,950
4.61
0.2364
1990
3,439
8.07
0.2347
1995
5,076
17.50
0.3448
1999
5,611
34.95
0.6229
Source: World Trade Orgamization
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WHERE WE ARE...
Japan

GLOBALLYCOMPETITIVE
China

South Korea
Taiwan 
Singapore
Hong Kong


Malaysia
Indonesia

Vietnam

India
Thailand
WHERE WE WANT TO GO . . .
Philippines
Here! By Year 2010
Note: Based on 12 - month Exports (In US$)
Source: Asiaweek, 9 June 2000
Philippine Realities:
High Unemployment Rate (1997)
Philippines
8.70%
Malaysia
Indonesia
Thailand
Singapore
Korea
Taiwan
China
Source: Neda
2.50%
4.68%
3.50%
1.95%
2.60%
2.82%
3.10%
22
Philippine Realities:
Increasing Unemployment
 Unemployment
as a percentage of
total labor force increase from 4.8%
in 1980-82 to 7.4% in 1994-1997
 Average hours worked per week
decreased from 47 hours in 1980-84
to 43 hours per week in 1995-99
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Philippine Realities: Migration of Filipino Talent
Registered Filipino Emigrants 1981-1999
USA
Canada
Australia
Japan
Gemany
United Kingdom
Others
Total
737,153
133,187
77,160
44,291
7,411
5,382
18,776
1,023,360
Source: Commission on Filipinos Overseas (CFO) as of
March 2000
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Philippine Realities:
Reliance on Overseas Employment
Overseas Filipino Workers Deployed (1993-1997)
1993
1994
1995
1996
1997
738,958
760,091
662,294
667,669
755,350
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Philippine Realities:
Second Most Skilled in Asia
Executives in Asia rank
India and the Philippines
tops for quality, cost and
availability of skilled labor.
Indonesia is the lowest
(Far East Economic Review
- September 2, 1999)
0= best
10= worst
India
Philippines
China
Australia
Taiwan
Japan
Vietnam
South Korea
Malaysia
Singapore
Thailand
Hong Kong
2.00
2.63
3.46
3.90
4.27
4.55
4.67
4.72
4.83
5.04
5.08
5.10
Indonesia
5.85
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Philippine Realities
Attractive Back Office
 America On Line (AOL) - 600 Filipinos
answer customer e-mails at the Clark Special Economic
Zone near Manila
 Andersen Consulting - 515 Filipinos develop
and customize software in downtown Manila
 Caltex - Accountants for the oil company in Manila
process transactions and authorize payments for
Southeast Asia and Hong Kong
Source: Far East Economic Review, September 2, 1999
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Policy Analysis:
Perspective on Human Capital
If there is one area of
globalization where the
Philippines is the most
competitive, it has to be in the
labor force or more generally in
human capital as compared to
financial capital or trade capital.

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Policy Analysis:
Perspective on Human Capital
If
that were so why then do we
have the highest unemployment
rate and the highest
underemployment rate?
29
Policy Analysis:
Perspective on Human Capital
Clearly the fault lies not in the
People but the Place.
 And when we talk of the Place,
we do not mean Physical
Infrastructure.

30
Policy Analysis:
Perspective on Human Capital
More
specifically, we argue
that when we refer to the
Place, we mean our past and
present public policy makers
have adopted the wrong
policies
31
Policy Analysis:
Perspective on Human Capital
Instead
of our public policy
makers focusing on our most
competitive resource, our local
human capital, we have instead
sought to protect our least
competitive resources, our
financial and trade capital
32
Policy Analysis:
Labor Force as of July 2000
Labor Force Working Abroad
Labor Force Working Here
Labor Force Unemployed
Total Labor Force Available
5.500
28.178
3.510
37.188
m
m
m
m
Source: Department of Labor and Employment
33
Philippine Analysis:
Labor Force as of July 2000
Labor Force Working Here
Services
Agriculture
Industry
28.178 m
13.176 m
10.568 m
4.434 m
Source: Department of Labor and Employment
34
Philippine Realities:
Service Sector Based
Structure of Output
(% of GDP)
1980
1998
Agriculture Value Added
Industry Value Added
Manufacturing Value Added
Service Value Added
25%
39%
26%
36%
17%
32%
22%
51%
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Policy Analysis:
Perspective on Human Capital
 Our
Labor force can be our source of
strength in globalization instead of being
our most debilitating problem
 For labor to be a source of strength, we
must reverse our policies of saving the
declining sectors, starving the promising
sectors and neglecting the critical sectors
36
Policy Conclusions
Develop
the promising
sectors
Save the critical sectors
Outsource the declining
sectors
37
Policy Recommendation
While business enterprises seek
to enhance shareholder value,
we recommend that public
officials and civil society set as
their governing goal the
enhancement of human capital
38
Policy Principles
1. Human capital is not a cost to be
avoided but a resource to be
drawn upon as a priority;
2. Human capital is not a
commodity to be traded but a
product to be upgraded;
39
Policy Principles
3. Human capital is not a factor of
production to be integrated into the
economy but a community of people
to be liberated from poverty;
4. Human capital will be consistently
utilized and constantly developed as
the competitive advantage of the
venture;
40
Policy Principles
5. Raw materials preferably sourced from
discarded or recycled products, not
human capital will be source of cost
competitiveness
6. Responsible management not human
capital will create and maintain the
flexibility to cope with globalization and
the volatile business environment; and
41
Policy Principles
7. Superior strategy and
not the
sacrifice of human capital will
bring success to the
Philippines.
42