The importance of Apec to PH

I have just returned from New Zealand where I attended the first meeting in 2018 of the Apec Business Advisory Council (Abac). We meet quarterly to discuss policies and programs recommended by the business community.

Apec (or Asia-Pacific Economic Cooperation) is important to the Philippines for several reasons. It accounts for 64 percent of foreign direct investments, 84 percent of exports, and 63 percent of our overseas Filipino workers. Here’s a snapshot of some areas we are currently discussing.

Micro, small, and medium-scale enterprise (MSME) development. MSMEs account for over 90 percent of businesses and employment in the Philippines but only for a fraction of that in terms of contribution to GDP and exports. Abac is working to integrate MSMEs into domestic and global value chains, seek greater access to finance, and enable MSMEs to enter into cross-border business through e-commerce. These are all challenging areas in the Philippines. While more MSMEs are entering into supply chains and inclusive business models with large corporations, we still have a long way to go. And while more Filipino consumers are shifting to e-commerce for some of their consumption, very few Philippine MSMEs are actually engaged in international trade through the internet.

Infrastructure development and finance. Across Asia, it is estimated that infrastructure needs in 2016-2030 will amount to $27 trillion. Every $1 billion in infrastructure spending generates about 200,000 direct jobs. Consistent spending of up to 5 percent of GDP on public infrastructure (which the Philippines is currently doing) will add 5-6 percent to GDP over time. While various modes of infrastructure finance have been discussed in Abac, a new topic of discussion has opened up on Islamic infrastructure investments. For the Philippines and the six Asean members within Apec, this could become a new and important source of financing. We are told that half of Malaysia’s public infrastructure was funded through Islamic financing.

Services agenda. The services sector is an important contributor to the Philippine economy. It accounts for 56 percent of GDP and 60 percent of employment and has been growing at 6.6 percent annually. It is in our interest to maintain an active stance on a regional-services agenda. From a broad perspective, the services sector includes services that are outsourced into the country and performed domestically and services that are performed overseas by people who move overseas to perform the work. Both areas are important to us because they represent two large and growing sectors—the outsourcing industry and overseas Filipinos. From this perspective, the movement of people and services are important to the Philippines because we have the skilled human resource base to draw on.

Digital innovation. This new policy discussion will focus on the opportunities and adjustments to the economy that will be brought about by artificial intelligence, robotics, machine learning, and other new technologies.  It is estimated that as much as 80 percent of today’s jobs may be changed significantly or eliminated in the next 40-50 years and replaced by an even larger number of new jobs. The impact on society will be enormous. The implications on today’s educational system and curriculum will be massive. What do we do with the people whose jobs will be lost? Can they be retrained for the new jobs? How do we educate and train people for the jobs of the future when we don’t even know what those jobs might be?  The conventional wisdom is that education must be lifelong, but there is no consensus yet on what should be taught, and how. I am wondering whether the Departments of Trade and Industry, of Education, and of Science and Technology in Apec have started a conversation on this topic.

These are just some of the topics that regularly come up for discussion in Abac and Apec. We hope to give you more regular updates on how we plan to promote Philippine interests in these areas.

Guillermo M. Luz (gm.luz@competitive.org.ph) is the private-sector cochair of the National Competitiveness Council and an alternate member of Abac Philippines.