Philippines may benefit from new globalization

By Beatrice M. Laforga, Reporter

THE PHILIPPINES could benefit substantially from the ongoing massive shift in global trade, with the services sector likely to see the most gains, the Asian Development Bank (ADB) said.

While the coronavirus pandemic and lockdowns disrupted global economy and trade, the ADB said Asia should adopt stronger trade liberalization and facilitation efforts so it can benefit from economies realigning their supply chain networks.

“I do believe that the Philippines has a strong potential given that its post-pandemic trade landscape will give more weight on the digital and services trade,” ADB Economic Research and Regional Cooperation Department Director for Regional Cooperation and Integration Cyn-Young Park said during the launch of the Asian Economic Integration Report (AEIR) 2021 on Wednesday.

The Philippines’ services sector will likely be among the gainers in the new round of globalization where digital transformation plays a key role, Ms. Park said. She noted Filipino workers may take on services-related jobs abroad, while the local business process outsourcing (BPO) sector remains intact.

The ADB noted cross-border migration took a huge blow last year, while the impact on remittance inflows especially to countries that rely on these remained “acute.”

“Despite the large drop, remittances to Asia will likely remain a relatively stable source of external financing compared with other types of financial flows,” it said.

Cash remittances to the Philippines inched down by 0.8% to $27.013 billion in the first 11 months of 2020, data from the central bank showed.

In the report, the ADB said Southeast Asia remained the most integrated subregion across Asia-Pacific, driven by trade, investments and migration of people.

This is based on the Asia-Pacific Regional Cooperation and Integration Index (ARCII) — which measures the regional integration of economies based on 26 indicators and in six dimensions.

The pandemic has also made digital transformation for countries crucial to boost the broader economic output, especially on trade and commerce and employment.

The ADB projected Southeast Asian economies could record an annual gain of 8.4% in regional output on average, if the digital sector expands by 20% in 2025%. Meanwhile, the region’s trade and employment could increase by an average of 8% and 6.2%, respectively.

“Digital connectivity in Asia has increased, with rising internet penetration, but large subregional gaps persist. Greater access to online resources through internet connectivity allows consumers, businesses, and governments to gain wider and better access to goods and services beyond geographic borders,” the report said.

Internet penetration in the Philippines was among the lowest in selected 20 Asian economies between 2006-2017. The rate of connectivity, however, increased significantly in 2014-2017, similar to all the other countries.

“Asia will continue its rise as a major player in the global digital platform market as wider access reaches more users and generates higher revenue growth,” the multilateral lender said.

However, countries should ensure that they are prepared to address the digital divide and prevent inequality from worsening.

The Philippines has a lot of catching up to do, as it scored 0.8221 in the Digital Platform Penetration (DPP) index in Network Readiness Subindexes which measured the country’s readiness on: technology, people, governance and impact. The country placed 13^th out of 34 Asia-Pacific economies tracked.

China topped the list with a DPP index score of 2.5847, Korea at 2.5283, Australia at 2.1010, Hong Kong at 2.0323, New Zealand at 1.8795, and Japan at 1.7794.

“This suggests that in order to sustainably develop the domestic digital platform economy, governments cannot slacken in upgrading the underlying infrastructure and regulatory foundations,” it added.

At the bottom of the list were Turkmenistan, Papua New Guinea, Timor-Leste, Lao PDR and Mongolia.

“For countries in the lowest group, there is a great need to catch up in all four aspects of network readiness,” it added.

The ADB said broader use of digital platforms could help countries achieve economic inclusion given that proper policies are in place.