Doing a Vietnam
How we wish our next secretary of the Department of Trade and Industry (DTI) would be known as the champion and booster of Philippine exports,” someone mused in a conversation last week. He was coming from the knowledge of how far behind we have been left by our comparable Asean peers in export performance. The numbers are indeed glaring: over the last five years, we averaged only $70 billion a year in merchandise exports, while Indonesia earned $182, Thailand $246, Malaysia $248, Vietnam $268, and Singapore $401 billion. We’re not even anywhere near half of what Indonesia made, the closest neighbor we trail.
The new government simply must give focused and determined attention to this abysmal export performance, as in it lies the key to solving the major perennial challenges our economy keeps facing, namely: (1) lack of quality jobs, (2) low incomes and high levels of poverty, and (3) higher prices, especially of food, leading to wide food insecurity and malnutrition among our poor—in short, the basics of presyo, trabaho, and kita. There are those who ask, “But why focus on exports, when we must worry about providing for our people’s needs first?” The question misses the point: it is by exporting more that we would be able to create more jobs and raise people’s incomes so that Filipinos can have more. In the same way, a family would not limit itself to producing only for its own members’ needs; neither could it feasibly produce everything they need or want. It must sell goods and services outside of the household (that is, “export”) for its members to earn the income to gain access to the many other things they cannot economically produce for themselves.
The “high performing Asian economies” (HPAEs) that pulled off the so-called “East Asian Miracle” in the 1980s and 1990s, documented by the World Bank in a book with the same title, had one thing in common: they pursued and attained very rapid export growth. “High-performing” meant they achieved rapid growth in average incomes and rapid reduction in poverty. Led by Japan, they included the four “tigers” of Hong Kong, South Korea, Singapore, and Taiwan, and by the early 1990s were joined by Indonesia, Malaysia, and Thailand. The book noted that creating an export push was vital in all these HPAEs.
Now comes Vietnam, the newest export miracle story in Asia, having multiplied its export earnings 23 times over the past 21 years, while the rest of its Asean peers only saw theirs expand two to four times in the same period (and ours grew the slowest). It has achieved the most rapid export growth seen in Asia. The key elements of its export strategy are hardly unique: trade liberalization, vigorous foreign direct investment promotion, currency undervaluation, and aggressive entry into free trade agreements with key trading partners, especially large markets like the United States.
Meanwhile, our own economy remains trapped in the vicious cycle of a limited internal market constraining the economy’s growth, leading to low average income and high poverty, bringing us back to the limited internal market. An export breakout as exemplified by the HPAEs would be key to getting out of this trap. That is why the Philippine Export Development Plan (PEDP) 2023-2027, now being spearheaded by the DTI, must receive far wider attention and commitment than all past PEDPs crafted since the enactment of the Export Development Act (Republic Act No. 7844) in 1994. People now like to say that an “all-of-government” effort is needed on this-or-that initiative; for the PEDP, an “all-of-nation” push is what the country needs. This is because achieving export expansion entails far more than what the DTI does. The PEDP should not be merely a DTI plan, for it is a plan that requires unison among all the moving parts—including exchange rate policy, infrastructure development, agricultural development strategy, human resource development, fiscal and monetary policies, and many more.
Vietnam, it seems, has conducted the complex symphony orchestra better than everyone else has. In a country where unity, solidarity, and teamwork have traditionally been in deficit, can our sterling new economic team manage to do a Vietnam?
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