Transcript JPEPA and Current Economic Situation in the Philippines

Export Hot Spots:
Post-Crisis Offensive Strategies
Dr. Thomas G. Aquino
Senior Undersecretary for International Trade
Department of Trade and Industry
2nd Quarter Gen. Membership Meeting
Philippine Exporters Confederation, Inc,
Makati City
July 2, 2009
Outline
I.
Assessing Past Trends
II.
Reviewing Projections
III. Viewing Post-recovery Scenarios
•
Post-crisis global environment
•
Post-recovery sectors
•
Government policies and Business
strategies
• In periods of uncertainty, it is important to
ask: What can be known?
• The decade is marked by three crises
(3Fs) most relevant to the Philippines:
– Food, Fuel, and Funds
World Fuel Prices
(index, annual, 1995=100)
450
400
350
300
250
200
150
100
50
Simple average of spot prices of U.K. Brent, Dubai
Fateh, and West Texas Intermediate
crude oil.
Source: IMF World Economic Outlook (April 2009)
0
1980
1984
1988
1992
1996
2000
2004
2008
World Rice Prices
(monthly, in US$ per metric ton)
1,200
1,000
800
600
400
200
Rice, 5 percent broken milled white rice, Thailand nominal price
quote, US$ per metric tonne
Source: IMF, as cited in http://www.indexmundi.com
0
Jun-04
Nov-04
Apr-05
Sep-05
Feb-06
Jul-06
Dec-06
May-07
Oct-07
Mar-08
Aug-08
Jan-09
Levels of Uncertainty
• Known
• Not known
– The global economy
will recover.
– When?
– Will it regain its
previous dynamism?
Financial Crisis Summary: Peak-to-trough
changes, all countries
Averages
Cumulative
% change
Duration,
in years
Real housing prices
-36
5.0
Real equity prices
-56
3.4
Unemployment,
trough-to-peak
7
4.8
Real per capita
GDP
-9.3
1.9
Source: Reinhart and Rogoff (2009), as cited by Prof. Pedro
Videla (UA&P forum, April 2009)
The long-term view: focus on 2000-’09
Global Trade Volume & Real GDP Growth
(in %)
15
preparing for
the rebound
10
5
0
1970
1975
1980
1985
1990
1995
2000
2005
2010
Trade Volume
-5
Real GDP
-10
Source:
IMF World Economic Outlook,
April 2009
-15
2009 - 2014:
forecasts
What is known:
• A recovery follows a recession.
– When? Green shoots are starting to show;
perhaps road to recovery visible by end of
2009.
– Will it regain its previous dynamism? Yes; but
there will be a reconfiguration among global
economic players.
Different Recovery Paths
Projected Type of
Recovery
Markets
U-Curve
•Emerging markets:
BRICA + Next 11 *
•European Union
L-Curve
•Japan
W-Curve
•United States
* BRICA – Brazil, Russia, India, China & ASEAN; Next 11 –Bangladesh,
Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South
Korea, Turkey, Vietnam.
Source: Prof. Bernardo Villegas, UA&P Mid-Year Briefing, June 2009
Real GDP Growth
(in %, Advanced vs. Developing Economies)
10.0
8.0
Advanced economies
Developing economies
6.0
4.0
2.0
0.0
1970
1975
1980
1985
1990
1995
2000
2005
2010
-2.0
-4.0
Source: IMF World Economic Outlook (2009)
-6.0
2009-2014:
forecasts
“Remerging” Economies
(1820 to 2025, estimated % share of world GDP)
Big 4
European
US
Japan
India
China
Source: World Bank, as cited by Prof. Pedro Videla (UA&P forum, April 2009)
Largest Economies in 2050
(Projected GDP, in US$ Trillion)
80
70
60
50
40
30
20
Source: "BRICS and Beyond," Goldman Sachs
Global Economics Group (2007)
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Post-recovery assessment
• The world will be as dynamic, if not more, than it was
before the crisis.
• Global income will be dispersed among more countries.
• G-7 countries will be less relevant; focus will be more
about BRICA and the Next 11 set of countries.
• As the world recovers, it will be subjected in the future to
the same pressures as it faced before the crisis (3F’s):
Food, Fuel, and Funds
World Trade Volume
(goods & services, annual % change)
15
10
5
0
1970
1975
1980
1985
1990
1995
2000
2005
2010
-5
-10
Note: Average growth rates for individual countries,
aggregated using PPP weights; aggregates
shift over time in favor of faster-growing economies,
giving the line an upward trend
Source: IMF World Economic Outlook
2009-2014:
forecasts
Encouraging early-signs
Exports
(US`$
M)
RP Export Performance
Year-on-Year declines
were lower in Mar-Apr
2009 than in Dec 2008,
Jan-Feb 2009;
Exports (US$ M)
Y-on-Y growth
5,000
4,500
Yr-on-Yr
growth
(%)
4,513
4,112
4,231
4,193
4,325
4,437
4,393
4,439
4,224
20%
10%
3,971
4,000
3,513
Month-on-Month
declines are flatter.
0%
3,500
2,907
3,000
2,675
2,803
-10%
2,511
2,500
2,506
-20%
2,000
1,500
-30%
1,000
-40%
500
-50%
Jan
2008
Feb
Mar
Source: NSO
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
Jan
Feb
2009
Mar
Apr
RP domestic economy resiliency
Structure of Gross Domestic Product
2007, in %, based on current prices
PCE *
RP
Japan
Thailand
Indonesia
Malaysia
Vietnam
China
India
69
57
53
63
46
65
37
55
Gov't. **
10
18
13
8
12
6
14
10
GDCF ***
15
24
27
25
22
42
44
38
Exports
43
18
73
29
110
77
41
21
* Private Consumption Expenditure; ** Government Consumption Expenditure
*** Gross Domestic Capital Formation
Source: Asian Development Bank
Imports
(42)
(16)
(66)
(25)
(90)
(90)
(31)
(24)
Major Product Share
January – March 2009
Electronics still the bulk of RP Exports
Coconut
Metal
products
components
2%
1%
Others
15%
Construction
1%
Electronics
61%
TAFT
6%
Minerals
5%
Homestyle
Products
3%
Food
5%
Motor vehicle
parts/component
s
1%
TAFT: Textile, Apparel, Footwear & Travelgoods (incl. fashion accessories)
Electronics vs Non-electronics Exports
January 2008 – March 2009
Non-electronics saved merchandise exports from freefall
Value in US$ Billion
6.0
5.0
4.0
TOTAL EXPORTS
ELECTRONICS
3.0
OTHERS
2.0
1.0
J 08
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Revised Export
Targets 2009-2010
2008
2009
2010
growth
actual value
growth**
value
growth**
value
%
(in US$ Million)
%
(in US$ Million)
%
(in US$ Million)
PEDP Revenue Streams
1. Electronics
-8
28,501
-20
22,801
10
25,081
2. Motor Vehicle Parts/Components
9
3,002
-50
1,501
40
2,100
Processed Food
25
998
10
1,098
10
1,208
Fresh Fruits
-3
723
8
781
8
843
Marine Products
38
808
20
970
40
1,357
Home furnishings
13
1,140
0
1,140
10
1,254
Giftwares/ decors
-10
183
-5
174
3
179
5. Minerals
-5
2,482
-51
1,225
40
1,715
6. Natural & Organic Products
8
67
67
5
70
3. Food
4. Homestyle Products
7. Textile, Apparel, Footwear &
Travelgoods
-14
0
2,297
-19
1,861
3
1,916
Other Products
Construction Materials
9
183
-10
165
5
173
Petroleum
12
1,240
20
1,488
40
2,083
Metal components
19
578
10
636
20
763
Coconut Products
42
1,348
28
1,725
50
2,588
Others
4
5,474
4
5,693
7
6,091
Total Goods
-3
49,024
-16
41,323
15
47,423
Total Services
20
10,140
27
12,890
30
16,756
BPO
20
5,850
25
7,313
30
9,506
other services
20
4,290
30
5,577
30
7,250
1
59,164
-8
54,213
18
64,179
Total Exports
Post-crisis global environment
• Return to dynamic growth but reconfiguration among
players
– US and Europe struggle to recover conditioned by structural
differences, e.g. mobility of factors of production
– Challenge to China in wielding/asserting global influence (FDIs,
ODAs, Africa engagement, participation in multilateral noneconomic initiatives e.g. security, health, disaster assistance,
etc.) as a huge country-market
– Efforts by ASEAN and rest of dialogue partners i.e. Japan,
Korea, Australia/New Zealand, at regional integration continue
– Moves of India to progressively implement reforms towards an
open-market economy
– Rise of South America as highly-competitive developing regional
market e.g. Brazil
– Africa in the horizon with opportunities for raw material sourcing,
transfer of know-how/services, and cost of labor advantage.
Post-recovery sectors
• Pre-global recession merchandise and services exports are
currently undergoing stress test. Sectors likely to recover or
emerge may fall under several categories:
– Exportable goods and services, backed by strong domestic market
base, would have higher chances of success in foreign markets
• consumer products, e.g. processed food
• services for overseas Filipinos
– Goods and services able to keep in step with increasing product
standards in overseas markets
• organic and natural products
– Providers of services based on relatively lower-cost business
models
• IT technical support
• healthcare
– Goods and services based on unique, natural selling propositions of
a tropical, archipelagic country
• specialized tourist facilities
• events creation
Government Policies and Business Strategies
• Government trade staff to receive training to intensify
familiarity with changing realities of competition and
entry into foreign markets
– US market undergoing structural change
– Africa as an unexplored region
• Elevate status of institutions, build capacity, and increase
size of resources devoted to export trade financing,
including proper appreciation of opportunities and risks
in reconfigured foreign markets
– PhilExim
• Step-up efforts that will enable national and local
agencies to realize the need and implement measures
that will remove unnecessary costs that underlie trade
transactions.
Government Policies and Business Strategies
• As subsidiary bodies, export-oriented industry
associations to continue professionalization of their
services to enable the national export-oriented federation
to address national issues affecting exports across
sectors and regions.
• Exporting companies to deepen expertise in doing
business in specific foreign markets as a way of
internationalizing their core operations.
• Exporting companies to continue encouraging
stakeholders (private and public) behind industry value
chain to implement best practices that make country
exports highly competitive.
Export Hot Spots:
Post-Crisis Offensive Strategies
Dr. Thomas G. Aquino
Senior Undersecretary for International Trade
Department of Trade and Industry
2nd Quarter Gen. Membership Meeting
Philippine Exporters Confederation, Inc,
Makati City
July 2, 2009