An East Asian Renaissance Philippines - PowerPoint PPT Presentation

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  1. An East Asian RenaissancePhilippines Manila June 4, 2007

  2. Philippines: Trade • Reduction in tariffs since the late 1980s from more than 23 to less than 5 percent • Plugging into regional trade networks, and moving up the value chain: • Share of intraregional exports up from 42 to about 50 percent of total since 1990 • Share of machinery in exports up from 20 to 66 percent • Share of parts and components trade is more than 56 percent, up from 18 in 1990. • Philippine exporters compete with countries with per capita incomes of $12,000 PPP-adjusted dollars, almost three times its own (adjusted) income • Some displacement by China in third markets, but Philippines is increasing exports to China • More displacement than Thailand and Indonesia but less than Malaysia • Share of China in exports has gone up from 1 to 5 percent since 1990 An East Asian Renaissance

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  10. Philippines: Finance • Bank assets, equity markets, and bond markets have not grown as rapidly as for neighbors since 1997 • Bank assets rose from 56 to 63% of GDP (Emerg. EAP: 95-150) • Equity market capitalization rose from 31 to 40% (37-71%) • Bonds outstanding rose from 22 to 37% (Emerg. EAP: 18-40%) • Moderate regional integration in finance • Philippine equity markets have become more integrated with countries in the region since 1998 • About 40 percent of FDI flows into the Philippines are intra-regional since 2000 • But access to finance does not seem to be a major problem for firms in the Philippines • Less than 15 percent of firms cite this as a problem An East Asian Renaissance

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  15. Philippines: Innovation • Main source of new technology is new machinery • FDI and purchase of foreign technology (large royalty payment) • Weak overall R&D effort at about 0.1 percent of GDP • Has fallen from 0.2 percent in 1992 • Malaysia is five times more, China ten times more • Share of business in R&D is about 60 percent of total • Share of government is about 20-25 percent • Philippines does not rely much on universities, and industry-university linkages are weak • Poor innovation climate in general • Credit market depth low • Researchers per million residents (50) lowest in emerging East Asia; • Quality of research institutions low • Philippines has invested in quantity of higher education; it should pay more attention to R&D in firms and universities • Else it may be difficult to maintain strong trade performance An East Asian Renaissance

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  24. Philippines: Urbanization • High urban share in population, rising rapidly • At 61 percent, close to Malaysia’s ratio at 65 percent, though its income is less than one third that of Malaysia • Urban population will grow at 2.8 percent per year, rising from 52 million to 88 million by 2030, or by about 1.5 million every year • Cities in the Philippines are showing strains • Manila’s livability is about what can be expected of countries at its per capita, but • Slums comprise a larger share of the Philippines’ urban population than the East Asian average • Sustainable city development requires a tailored approach • Urban development is of three institutional types: comprehensive (China), mixed metropolitan (Vietnam), and fragmented (Philippines) • For the Philippines, the solution lies in greater private sector and community involvement An East Asian Renaissance

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  28. Philippines: Cohesion • Modest progress in reducing poverty levels since 1990 • At $1/day, noticeable decrease: from about 20 percent to 10 percent today (12 to 9 million poor people) • At $2/day, small increase (34 to 35 million), though ratio fell from 52 to 42 percent • Increase in consumption inequality since 1990 • Philippines now has highest income inequality among East Asia’s middle income countries • Progress in human development indicators, but wide spatial differences persist • Income: Rural-urban gaps high; widened between 1990-2000 • Human development: Large rural-urban and other spatial gaps An East Asian Renaissance

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  33. Philippines: Corruption • Corruption levels are high • About what to expect from a country with Philippines’ per capita income, or somewhat lower (Malaysia better than expected) • Decentralization can exacerbate corruption in the short term • Government effectiveness are better than what would be predicted from its control of corruption index • For public service delivery • For regulation of private sector • But corruption is seen as a constraint to enterprises • More than one out of three firms in the Philippines see it as a severe constraint to doing business An East Asian Renaissance

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  39. Philippines • Is integrating strongly into regional production networks • Intra-industry trade • Must strengthen innovation to maintain this integration • Research effort and institutions • Lags in all aspects of domestic integration • Urbanization • Inequality • Corruption An East Asian Renaissance

  40. Extra Tables and Graphs

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