Looking beyond 2015
THERE are three reasons, at three different levels, why 2015 is a milestone year for us in the Philippines.
As is well known, this year marks the advent of the Asean Economic Community (AEC) as the 10 Southeast Asian economies formalize the establishment of a single market and production base at year’s end. This year, we are also host and chair of the Asia Pacific Economic Cooperation (Apec), an important responsibility that also brings great opportunity to help shape the future of the wider Asia-Pacific regional economy. And at the global level, this is also the reference year for the Millennium Development Goals (MDGs), by which time members of the United Nations, at the turn of the millennium, had targeted cutting into half the incidence of poverty that prevailed in the 1990s.
We’re fine as far as the first two milestones are concerned, having emerged in the past year as the fastest-growing economy in Southeast Asia, and second fastest-growing economy in the world. Prices are stable, with the current 2.5-percent annual inflation rate being at a historical low. Even the jobs data, until recently the spoiler in our overall economic performance record, have shown marked improvement. Unemployment is now consistently declining (6.6 percent as of last January, against 7.5 percent the year before), and annual net job creation has exceeded 1 million new jobs for four consecutive quarters to date.
However, it’s on the third milestone where we’re behind: We are already sure to miss our MDG target poverty rate of 16.6 percent this year. Official poverty incidence actually went up to 25.8 percent in the first half of 2014, from 24.6 percent in 2013. Unfortunately, our positive showing on the economic front is not yet matched by our progress in the fight against poverty.
With the AEC upon us, the Asean economies are already setting their sights beyond 2015. Free trade has been nearly complete since 2010, with a very small number of remaining exceptions (such as rice and sugar in the Philippines) still facing tariffs or quantitative restrictions. Aside from free trade, various other measures to achieve closer integration and stronger connectivity among the Asean economies are in place or in active progress. Asean, and the world for that matter, has moved beyond removing trade quotas and tariffs, and is focusing more on facilitating trade by addressing cumbersome border procedures and various other nontariff barriers to trade. The World Trade Organization now has the Agreement on Trade Facilitation as its primary focus.
Beyond 2015, the Asean nations are looking at both widening and deepening regional integration. A wider geographic scope is being pursued with Asean’s dialogue partners Australia, China, India, Japan, New Zealand and South Korea, to form the Regional Comprehensive Economic Partnership or RCEP. The 16 countries forming this expanded union would collectively account for over three billion people (almost half of the total world population) and aggregate gross domestic product (GDP) of about $17 trillion (almost 30 percent of global GDP). The grouping also accounts for about 40 percent of world trade. Ongoing discussions on RCEP encompass trade in services apart from goods, investments, intellectual property and dispute settlement mechanisms. The investment agenda will go beyond liberalization and will cover promotion, protection and facilitation as well.
In the same vein, 12 countries across the Pacific, including four Asean members, are forming the Trans Pacific Partnership (TPP), described as an ambitious new generation, high-standard trade agreement. Originally started by Brunei, Chile, New Zealand and Singapore in 2005, the group now includes Australia, Canada, Japan, Malaysia, Mexico, Peru, Singapore, the United States and Vietnam as well. Together, they have a combined population of 800 million and collective GDP of $28 trillion representing 40 percent of global GDP; and account for 30 percent of world trade, with
$9 trillion in merchandise trade and $2 trillion in trade in services. The group aims to build on the phenomenal growth of global value chains by further liberalization and facilitation of trade and investment, and promote competitiveness, wider small and medium enterprise participation, and overall institutional development.
About half of current Philippine exports and a third of its imports are accounted for by the current TPP countries, while about a quarter of our foreign direct investments come from the group. This is a group that the Philippines can’t afford not to be in; being excluded from the preferential access members would enjoy with one another could significantly constrict our trade and investment opportunities. Membership, on the other hand, would bring greatly expanded opportunities. But membership in either RCEP or TPP demands of us further economic reforms to improve the investment environment and promote fair competition, and we have much remaining homework to do on these.
Even more homework is needed to catch up on our MDG gap, even as the rest of the world is now looking beyond 2015 and is poised to set a new generation of Sustainable Development Goals (SDGs). Just catching up on our missed MDG poverty target will entail working double time on poverty reduction, and given our historical track record, this will be a tall order. Moving on to the SDGs that address wider concerns including environmental, political and cultural dimensions of human welfare multiplies the homework we need to do even more.
Indeed we need to do much gearing up as we look beyond 2015.
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