Strengthening the Philippines’ Social Capacity for Trade ...hicec/coe/coe/PPT/seminar24-1.pdf ·...
Transcript of Strengthening the Philippines’ Social Capacity for Trade ...hicec/coe/coe/PPT/seminar24-1.pdf ·...
Strengthening the Philippines’Social Capacity for Trade and
Investment
Eric C. Batalla, PhDAssociate Professor
De La Salle University24th COE Seminar
IDEC Hiroshima University 14 February 2006
ObjectivesDetermine opportunities for strengthening the Philippines’ social capacity for expanded trade and investmentReview certain historical and contemporary economic conditions of the Philippines Examine Japan’s role in and impact on historical Philippine trade and economic conditions Discuss empirical relationships, particulary the effects of ODA, FDI, and trade on productivity, savings, and income Provide recommendations for international cooperation policy (trade, ODA, and FDI)
Framework and Methodology
Use of the Actor-Factor Matrix framework (Matsuoka et al) and Historical Analysis
Determine trends as well as strengths and weaknesses of actors within each broad factorBased on statistics and existing studies, provide a sample of historical and benchmark indicators of strengths and weaknesses in 1) policy, 2) human resource & organization, as well as 3) knowledge, information and technology.
Actor-Factor Matrix in SCA Framework (Matsuoka et al, 2005)
F:C
G:C
G:F
Citizens
Firms
Government
Knowledge, Information, &
Technology
Human Resources and
Organization
Policy & Measure
Sector
Presentation Outline
Brief introduction to relevant features of Philippine economic structure and performanceReview of trade capacity and performanceEconomic relations between Japan and the Philippines
An Introduction
Structure and Performance
Brief introduction of the Philippines
7,100 islands lying between the South China Sea in the west and the Pacific Ocean in the eastA former colony of Spain and the United States; 2004 GDP of US$86 billion Current population of over 81 million, of mixed races but predominantly of Malay-Indonesian-Polynesian stock
Economic Trends since 1950
A low middle-income economy (per capita GNI of US$1,080)Moderate economic growth averaging 4.4% a yearPopulation growth averaging 2.7 a yearBased on rule of 70, per capita income would double in 41 years (assuming constant growth rates in income and population) => not acceptable
Some Structural Changes in the Economy
Shift of concentration of GVA and employment away from the primary sectorIncrease in skilled laborForeign trade has also shifted away from the primary sector to assembled goods, intermediate inputs, and light manufacturing. High share of foreign trade to GDP Overseas labor remittances relieving foreign exchange and liquidity problems (more than US$10 billion in 2005)
Production Structure
Source: Table 2, Coraroton (2004)
52.0 21.9 30.9 17.2 1998-2000
47.0 22.8 32.2 20.7 1994-97
45.4 24.4 33.2 21.5 1991-93
42.2 25.0 34.7 23.1 1986-90
38.7 24.7 37.4 239.0 1983-85
35.3 25.6 36.8 27.9 1973-82
39.0 24.7 31.7 29.3 1967-72
ServicesManufacturingIndustryAgriculture
Gross Value Added Shares
Period
Employment Structure
Source: Table 3, Coraroton (2004)
45.5 54.5 45.3 9.8 16.3 38.4 1998-2000
41.7 58.3 40.7 10.1 16.2 43.0 1994-97
39.0 61.0 38.9 10.4 15.9 45.3 1991-93
35.7 64.3 38.0 10.0 15.0 46.9 1986-90
31.4 68.6 35.5 9.9 14.6 50.0 1983-85
28.1 71.9 32.7 14.7 52.5 1973-82
20.4 79.6 29.4 15.5 55.1 1967-72
SkilledUnskilledServicesManufacturingIndustryAgriculture
Quality of Labor (%)Employment Share
Period
Shares of Principal Exports of the Philippines, by commodity, 1920-2005
Sources: Annual Report of the Insular Collector of Customs (1928, 1938); Baldwin (1975), Lamberte et al (1989), NSO, BETP
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Total Exports
84.8 85.7 75.7 90.6 80.8 87.0 89.8 85.8 Total Share of Principal Exports
72.2 73.3 23.5 3.5 ----Industrial Manufactures (electronics, machinery)
3.0 2.6 23.4 47.5 63.1 70.2 49.4 47.8
Resource-Based Products (coconut, timber, minerals, etc.)
3.3 2.3 11.8 32.6 17.7 16.7 35.0 32.8 Food and Food Preparations (sugar)
6.3 7.5 17.0 7.0 --5.4 5.2 Consumer Manufactures (garments, houseware, etc)
20052000198519751965195019351920Commodity Group
Ratio of Exports and Imports to GDP, 1950-2004
0%
10%
20%
30%
40%
50%
60%
70%
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000
Exports: GDP Ratio
Imports: GDP ratio
Number of Deployed Workers and Amount of Remittances
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
Number of Deployed
Amount Remitted (million US$)
Amount of Remittances (in million US$)Number of Deployed Workers
Structural and Persistent ProblemsChronic fiscal deficitsChronic trade deficitsLarge debt-service outlaysLarge informal sector, 94% of total private employment of 31.6 million (Batalla , 2005)Slow capital formation
Fiscal Surplus/Deficit as % of GDP,1957-2004
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
1957 1962 1967 1972 1977 1982 1987 1992 1997 2002
National Government Debt Service Payments, 1983-2004
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
0%
2%
4%
6%
8%
10%
12%
14%
Total NG Debt Service Payments
NG Debt Service as % of GDP
Million Pesos
Capital Formation, 1959-2003
-
1
2
3
4
5
6
7
8
1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003
2000 billion pesos
Trade Capacity Support Development and Performance
Policy history, outcomes, perennial challenges
Trade Capacity Support Development
Historical background of government policy and administration with respect to trade and investmentUse of the Actor-Factor matrix
Actor-Factor Matrix:Trade and Investment (Matsuoka et al, 2005)
F:C
G:C
G:F
Citizens
Firms
Government
Knowledge, Information, &
Technology
Human Resources and
Organization
Policy & Measure
Sector
Some Instruments of Trade Protection, 1948-80
Foreign Exchange ControlImport QuotasImport BansHigh TariffsExport Taxes
Trade Policy Regimes Period of high restriction, 1950-1981
(some temporary relaxing during the period, e.g., exchange controls, import quotas)
Liberalization Period (1981-present)1981-85 Tariff reform program (TRP I)1986-89 Import Liberalization program1991-95 E.O. 470 (TRP II)1992 Foreign Exchange Deregulation1996-present, TRP III and IV (E.O. 264, et al)2000 Retail Trade Liberalization Act
Trade Liberalization
Tariff Reform Program I– reduction of tariff band from 10%-100% to 10%-50%Import Liberalization program – lifting of import licensing requirements and import bansE.O 470 (July 1991) further reduction of tariffs within 3% and 30% rangeTRP III and IV- reduction of tariff band to 3%-10% range and 0%-5% range (except for sensitive agri products).
Investment Policy Regimes
Investment Incentives Act of 19671983 Omnibus Investment Code (BP391)1987 Omnibus Investment Code (EO226)1991 Foreign Investment Act
Up to 100% foreign equity except those placed under Negative List
1998 Foreign Investments ListReduced items in Negative List
Other Policies
1970 Export Incentives ActFiscal incentives for exporters
1992 Export Development Act1994 Financial Liberalization
Fiscal Incentives for exporters
Tax and duty exemptions for capital equipment, raw materials and supplies, organizational licensesTax deductions of labor training expenses, organizational and operating expensesTax credits on supplies and materials and domestic capital equipmentTax holidays for 6 years for pioneer industries, 4 years for non-pioneer industries, and 3 years for expansion firms.Special 5% tax on gross income in lieu of national and local taxesOthers in 1987 OIC
Human Resources and Organization
Assistance to Exporters by DTI and attached agencies
Trade fairs and expos (CITEM)Finance (DBP, LBP, etc.)Information (One-stop centers, EXPONET, DTI Tradeline, etc.)Training (4 including PTTC.) Production (various)
Fiscal incentives administration by DTI particularly BOI and PEZA
Knowledge and Technology
Online information on trade and investment and other government matters (trade statistics, policies and procedures, organization, market profiles, product profiles, etc.)Various training programs (e.g., PTTC)
Capacity Development Systems and Effects
The 1980s saw the development of a system for trade capacity developmentTrade Performance in 1990s suggests that the system workedEffects of Change in Policy and Administration
Change in the slope of Philippine trade performanceIncrease share to GDP
Long-term Trend in Trade, 1900-2003Total Value of Philippine Trade and Exports, 1900-2003
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
1900 1933 1938 1943 1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003
Exports
Total Foreign Trade
Million US$
Structural Adjustment
Tariff Reform III
Primary Commodities Export Dependence
Start of Trade Liberalization
Start of Protection Era
Value o f P hilippine Expo rts and Impo rts, 1980-2004
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
1980 1984 1988 1992 1996 2000r 2004
Expor ts
Impor ts
In Mi l l ion US$ FOB
Revealed Comparative Advantages (RCA)
Before as producer of certain agricultural and resource-based commoditiesLater as subcontractor of garments and electronic productsThen, as assembler of industrial goods, particularly electronic components and consumer electronics
Specialization Index (Intracen)
Constraints to Trade and Investment
Salazar et al (1986) Lamberte et al (2003) studyWorld Bank study on Doing Business in 2005
Salazar et al (1986)May-October 1984 survey reveals SME availment of fiscal incentives from NACIDA and BOI
30% of 230 respondents availed of fiscal incentives; 65% availed of financial assistance from informal and formal sourcesAmong other findings, availment of fiscal incentives is 1) characterized by red tape and 2) costly.Access to short-term loans is relatively easier than long-term borrowings
Expenses incurred
“Entrepreneurs incurred an average of P1,883 when they applied for NACIDA or BOI incentives. The figure seems high because the maximum amount charged as NACIDA registration fee is P300 only.”“Expenses incurred for project study preparation made up the bulk of total average expenditure.”
Salazar et al (1986:136)
Willingness to avail of Incentives in the Future (Salazar et al, 1986)
The majority (59%) gave positive responses provided that:
Red tape in applying for incentives is eliminatedRespondents will learn of the promulgation of useful incentivesIncentives will assure them of market prospectsIncentives will serve agro-industriesIncentives will provide real cost reduction in the firm’s operation
Reasons for refusal to avail of incentives in the future (Salazar et al 1986)
Forty-one per cent expressed refusal to avail of incentives for the following reasons:
They do not want to get involved with government agencies because this entails more cost than benefitsAvailment would require too much red tapeGovernment is not capable of helping SMEsconsidering its present predicament.
Source: Melito Salazar et al (1986), "Financial factors and small and medium enterprise development in the Philippines," in Kenneth James and Narongchai Akrasanee, Small and Medium Business Improvement in the ASEAN Region--Financial Factors, Singapore: ISEAS, p.115
12.62922.652Informal sources9.52239.190Formal sources
Borrowings--2.15Others
1.3398.2203Profit re-investment16.53812.629Inheritance89.620671.2165Own savings
Own Investment
% to total (230)No.
% to total (230)No.
Sources of Investment/Year
Initial investmentsSubsequent
investments
Sources of SME Financing
Borrowers and Non-Borrowers by Source
Source: Salazar et al 1986: 123
36.5 84Non-Borrowers
6.9 16Combination
18.2 42Informal
38.3 88Formal
Borrowers
%NumberRespondents
Sources of Additional Cash
Number %Respondents
Source: Salazar et al 125
7.9 14Assignment of receivables
51.4 91Customer Advances9.0 16From Money-Lenders
17.5 41From Friends41.2 73From Relatives20.9 37From Banks
Some Opportunities
Opportunities to improve the delivery of government fiscal incentivesOpportunities for long-term financial assistance to SMEs
Benchmarking using World Bank study (2005)
Doing Business in 2005Survey conducted in January 2004Starting a Business, Registering Property, Protecting Investors, Closing a Business, Getting Credit, Hiring and Firing workers
Starting a Business (January 2004)
028.65611Vietnam
00.655United States
06.7338Thailand
01.287Singapore
2.219.55011Philippines
025.1309Malaysia
33217.72212South Korea
74.910.63111Japan
125.6130.715112Indonesia
Minimum capital (% of income per
capita)
Cost (% of income per capita)
Time (days)
Number of proceduresCountry
Source: World Bank, Doing Business in 2005, pp. 90-1.
Hiring and Firing Workers
9855704056Vietnam
831000United States
4742204067Thailand
40000Singapore
9041406022Philippines
7431000Malaysia
9034306011South Korea
212404033Japan
15757704061Indonesia
Firing Costs (weeks)
Rigidity of employment
index (0‐100)
Difficulty of firing index (0‐100)
Rigidity of Hours index (0‐100)
Difficulty of hiring index (0‐100)Country
Source: World Bank, Doing Business in 2005, pp 90-91
Registering Property
5.5785Vietnam
0.5124United States
6.322Thailand
1.593Singapore
5.7338Philippines
2.21434Malaysia
6.3117South Korea
4.1146Japan
11336Indonesia
Cost (% of property value)Time (days)
Number of proceduresCountry
Source: World Bank, Doing Business in 2005, pp.93-4
Getting Credit
08342Vietnam
10000670.1United States
1500551.1Thailand
33504100.3Singapore
340258.3Philippines
01233.2Malaysia
10000568.1South Korea
6150662.7Japan
04352.5Indonesia
Private bureau coverage(per 1,000 adults)
Public registry coverage (per 1,000 adults)
Credit information index(0‐6)
Legal rights index(0‐10)
Cost to create
collateral(% of income per capita)Country
Source: World Bank, Doing Business in 2005, pp-93-4.
Investor Protection and Contract Enforcement
30.1404371Vietnam
7.5250177United States
13.4390266Thailand
969235Singapore
50.7380256Philippines
20.2300315Malaysia
5.475296South Korea
8.660166Japan
126.5570344Indonesia
Cost (% of debt)
Time (days)
Number of proceduresDisclosure Index (0‐7)
Enforcing ContractsProtecting Investors
Country
Source: World Bank, Doing Business in 2005, pp. 96-7.
Lamberte et al (2003)Major barrier to investment is cost of doing business (p. 140)
Second highest cost of electricity in the regionHigh transportation costs due to inefficiency and monopoliesPoor infrastructure (low tax revenues + large portion of government budget to debt service; BOT impact is limited)Bureaucratic red tape and widespread corruption Peace and order as a stumbling block to investment in some parts of the country
Summary of Findings for Government Support
Costly transactions: need to provide the physical infrastructural support as well as reduced costs of transactions with governmentNeed for better policies and procedures in supporting business
Also, need to tap large pool of manpower for entrepreneurship and labor
Need for better knowledge and technologyNeed for more efficient, meritocratic, and professional personnel in government
Summary of Findings for Business Sector
Diversification of export commoditiesNeed to improve business effectiveness of other industries aside from electronics and IT (e.g., food and resource-based manufactures)Need to diversify modern industries and invest in physical infrastructure to reduce costs of inputsGreater access to cheap credit for SMEs, perhaps through a more liberal financial systemImprove working conditions and productivity incentives
Required improvements in government support for investment
Reduce number of procedures, time, and costs incurred starting a businessregistering property
Reduction in number of procedures, time, and cost incurred in enforcing contracts=>government and legal systemImprove flexibility of working hours for workers=>labor laws and firm operationsReduce difficulty and costs of firing=>labor laws and administration
In the business sector
Need for more credit information agenciesBanking system should lower costs of creating collateral when getting credit=>improvements in financial systemManufacturing and other companies should improve working conditions, including flexibility of working hours
Economic Relations between Japan and the Philippines
Trade, FDI, ODA, productivity
Sources:Annual Report of the Insular Collector of Customs, various issues from 1909 to 1938; U.S. Department of
Commerce and Labor, 1907. The Commercial Philippines in 1906, Washington: GPO, January. UNCTAD, Handbook of Statistics 2005, http://stats.unctad.org/Handbook/ReportFolders/ReportFolders.aspx.
Philippine Exports to and Imports from Japan, 1900-2004
0
2,500
5,000
7,500
10,000
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
Exports
Imports
In Million US$
Share of Japan in Philippine Trade, 1950-2004
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1950 1960 1970 1980 1990 2000
Total Exports Total Imports
Amounts of Japanese FDI in the Philippines, 1965-2004
0
100
200
300
400
500
600
700
800
900
1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004
US$ million
Source: JETRO
Where J-FDI went
Manufacturing share of J-FDI1981-85: 54.42% (Austria & Medalla, 1996)1985-90: 76.44% (Austria & Medalla, 1996)1990-95: 68% (based on MOF data)1995-2000: 73% (based on MOF data)2000-04: 78% (based on MOF data)
Manufacturing and Non-manufacturing shares of J-FDI Flows in the Philippines, 1989-2004
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Non-Manuf act ur ing Tot al Manuf act ur ing Tot al
Japan’s FDI in ASEAN-4, 1965-2004
Source: JETRO; MOF18,0696,37510,983 728 Thailand
7,8143,1973,786 868 Philippines
10,4992,2057,249 1,110 Malaysia
28,1244,61015,499 8,389 Indonesia
1951-20041998-20041985-971965-1985Country
Cumulative Total Amounts in US$ millions
Japanese ODA to the PhilippinesIn 1990s, the Philippines as among top five recipients of J-ODA (OECD data).51% of Total 2001 ODA to Philippines comes from Japan (Embassy of Japan). Cumulative Grants 1970-2002: $3.5BCumulative Loans, 1970-2002: $6.2B
J-ODA Disbursements By Type, 1970-2004
0
100
200
300
400
500
600
700
800
900
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
Grants
Loans
Million $
Source: DAC
Mapalad (2000) study on J-ODA, Philippine savings and economy
Savings not discouraged by ODA, i.e., ODA is not a substitute for savings in the Philippines where there are savings and foreign exchange gaps.Positive relationship between ODA and income growth, though impact is very small for the PhilippinesStill little impact on employment, poverty and income distribution
Note: For Indonesia, Malaysia, and Thailand, IDCJ, 1995 for 1971-91; for the Philippines, Mapalad 1973-95
Source: Table 9 of Mapalad, 2000, p. 21 as cited in Tecson, 2001, p.38.
0.410.490.360.83Philippines7.39.52.35.3Thailand2.62.10.91.4Malaysia52.91.63.3Indonesia
ImportsExportsEmploymentReal IncomeCountry
Comparison of the Impact of Japan's ODA in Selected Southeast Asian Countries
(as percentage of actual values)
Amounts and Shares of ODA to ASEAN-41985-2004
Source: DAC
57.7%58,406.87 33,673.97 Total ASEAN 466.4%10,382.29 6,895.67 Thailand51.6%17,432.64 9,003.81 Philippines47.7%2,745.31 1,308.94 Malaysia59.1%27,846.63 16,465.55 Indonesia
Japan Share of Total ODA
ODA from All Donors
ODA from JapanRecipient Country
(Net Disbursements, Current US$ million)
Trade, FDI, and Productivity
Based on Coraroton (2004), total factor productivity (TFP) from 1976-99 is determined by FDI, trade, manufacturing GVA share to GDP, and R & D. Price changes are not statistically significantImplication: business capacity for trade and investments may depend on productivity. However, productivity is also based on trade/demand conditions, investments, and other factors.
Other opportunities: tariff reduction
International Trade Center (Intracen-UNCTAD) identifies export potentials for the Philippines US is no. 1 trading partnerJapan is no. 2
Tariff applied by importer,
%
Relative Trade Potential
share in PHL 's
exports of sector, %
Current Exports
2002-2003
Sector
0 to 5%3. Predicted = Current or low values31.4%12,332Publishing, printing and reproduction of recorded media
0 to 5%2. Strong current trade (above predicted)20.2%34,566Forestry and Fishing (products)
0 to 5%4. Untapped trade potential12.6%34,643Rubber and plastic products
0 to 5%4. Untapped trade potential8.8%48,659Metal and metal products
0 to 5%3. Predicted = Current or low values7.3%49,823Agriculture and hunting
0 to 5%4. Untapped trade potential12.2%52,317Machinery and equipment
0 to 5%3. Predicted = Current or low values13.5%53,598Chemicals and chemical products
0 to 5%3. Predicted = Current or low values31.9%61,358Non-metallic mineral products
0 to 5%2. Strong current trade (above predicted)19.8%70,901Wood and wood products
0 to 5%5. High untapped trade potential11.7%124,131Motor vehicles and other transport equipment
0 to 5%3. Predicted = Current or low values26.4%224,206Precision instruments
0 to 5%2. Strong current trade (above predicted)54.7%344,637Other manufacturing
0 to 5%1. Very strong current trade (above predicted)35.9%507,493Food, beverages and tobacco
10 to 15%1. Very strong current trade (above predicted)71.8%2,051,956Textiles, clothing and leather
0 to 5%4. Untapped trade potential19.9%5,200,711Electrical and electronic equipment
3. Predicted = Current or low values24.1%8,879,417TOTAL
Philippine Exports to the US
Philippine Exports to JapanTariff
applied by importer,
%
Relative Trade Potentialshare in PHL 's
exports of sector, %
Current Exports 2002-2003
Sector
0 to 5%3. Predicted = Current or low values18.5%29,567Recycling
0 to 5%3. Predicted = Current or low values8.2%32,467Chemicals and chemical products
> 50%3. Predicted = Current or low values13.9%52,660Coke, petroleum products and nuclear fuel
0 to 5%2. Strong current trade (above predicted)12.2%67,316Metal and metal products
0 to 5%2. Strong current trade (above predicted)11.6%73,104Other manufacturing
0 to 5%1. Very strong current trade (above predicted)35.2%96,308Rubber and plastic products
20 to 25%3. Predicted = Current or low values4.2%118,956Textiles, clothing and leather
0 to 5%1. Very strong current trade (above predicted)28.8%123,745Machinery and equipment
0 to 5%2. Strong current trade (above predicted)40.4%145,072Wood and wood products
5 to 10%3. Predicted = Current or low values89.4%154,376Mining and quarrying
5 to 10%4. Untapped trade potential12.3%174,403Food, beverages and tobacco
0 to 5%1. Very strong current trade (above predicted)21.7%184,771Precision instruments
0 to 5%1. Very strong current trade (above predicted)21.4%227,264Motor vehicles and other transport equipment
0 to 5%1. Very strong current trade (above predicted)49.1%333,774Agriculture and hunting
0 to 5%1. Very strong current trade (above predicted)15.3%4,016,006Electrical and electronic equipment
1. Very strong current trade (above predicted)15.9%5,874,045TOTAL
Implication of Intracen data
Tariffs limit trade capacity (real and potential)Examine export commodities that are untapped or have weak trade values
Derived premises to support international cooperation policy
Recently, productivity and capacity for export trade depend much on export-oriented investments and trade conditionsIncreased investments and trade depend on costs of doing business (tariffs and duties included) as well as relative specializations
Increasing Phil. Trade Capacity with Japan: Opportunities for Int’l Cooperation
J-ODA support for increased FDI and trade Improvement in investment environment: physical infrastructure, peace and order-related technologiesSME trade capacity development (production/technology, finance, market linkages, and information)
Continue J-ODA support to strengthen host government support capacity in benchmarked areas Reduction of tariffs in garments, etc. Diversification of export-oriented investments e.g., 1) food beverage and tobacco and 2) textiles, clothing, leather possibly (through joint ventures with Phil. Firms)
Other Options for Expanding Philippine Capacity Trade and Investment
ODA interventions to “formalize” the large informal sector, e.g., policy, human resource and organization development, technology transfer and development. Forming direct business linkages between Japanese enterprises and Philippine SMEs
Concluding RemarksThe Philippine capacity for trade is gradually expanding owing to:
Trade and investment liberalization policy and administrationResponse of private sector to this policy
However, owing to external challenges such as fierce competition with other countries and the still insufficiently addressed internal weaknesses, investments have been adversely affected.Strategic efforts to expand export tradePolicy Question: Develop a new system or enhance existing one? ODA, FDI can greatly assist in expanding social capacity for trade and investments
Study Limitations and Suggestions
The preliminary study is based on extant data and indicators collected under time constraints There is an apparent need to disaggregate data to fully understand the system and capacity for trade.Surveys and more focused research may be needed to determine actor-factor conditions in specific industries.