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How Taiwan developed a strong export trade

One gets the feeling, when reading their observations regarding this country’s current economic malaise, that its economic managers believe that the increasingly worrisome merchandise trade imbalance is a problem that will eventually just go away. They are wrong. The problem is not going to go away anytime soon, with all the dire implications of that for the BOP (balance of payments) and the external value of the peso.

The principal reason why the current merchandise trade imbalance is unlikely to dissipate in quick fashion is that of the four export groups—the Big Four —that the Philippines used to be able to depend on, only one, coconut products, is still there. The other three are gone as export-trade prime movers. The first to go was wood products; the ban on log exports enacted several decades ago put an end to such exports. The instability of the copper concentrates market, occasioned by the rise of substitute raw materials, knocked out mining products as a leading source of export trade revenues. And the termination in 1974 of the Laurel-Langley Agreement, with its large, preferential-price for Philippine sugar, wrote finis to the major role of sugar as a Big Four export product.

The fact is that this country’s export system has experienced a structural shift. The Philippines has ceased to be essentially an exporter of merchandise. Today it is primarily an exporter of labor, either totally (as in Overseas Filipino Workers) or partially (as in semi-conductor manufacturing and other assembly-type production operations).         

The economic managers—the Secretary of Trade and Industry in particular—should stop glossing over the trade-deficit problem and conduct a searching review of the economic landscape, with a view to determining where the new export industries will be coming from. It is simply no longer enough to provide fiscal incentives and believe, as in the film “Field of Dreams” that “If you give them incentives, they will come.”         

I strongly suggest that our economic managers—especially the Secretary of Trade and Industry—take a leaf out of the strategy that Taiwan implemented in order to develop a world-competing export trade. The strategy was born almost immediately after the Chiang Kai-shek group fled to that island in 1949.            

The first thing that the Chiang-led Nationalist government did was to engage the services of SRI (Stanford Research Institute) to develop an export trade plan for Taiwan.

In line with its reputation as a first-rate research institution, SRI immediately set about doing an inventory of all the island’s resources, particularly its manpower and natural resources. SRI’s approach was guided by a philosophy consisting of two parts, namely, (1) making the best use of what resources were available in Taiwan and (2) knowing what resources it would have to bring into the island. The inventory revealed that long-neglected Taiwan was not without resources and that, with government guidance and assistance, many new industries, most of them small, saw the light of day. One of the potential industries that SRI spotted for development was a shipbreaking industry: old vessels were brought into Taiwan’s harbors and there broken up, the dismantled parts recycled into new Taiwan-built vessels or exported.

To borrow a tired, old phrase, the rest is history. Taiwan slowly but painstakingly built a world-class merchandise export trade. Their achievements would not have been possible without steadfast hand-holding on the part of the government. Government was a true partner of the Taiwanese private sector in that game-changing endeavor.

In this country the government has largely limited itself to providing fiscal and other incentives to potential investors, whether these are or are not located in facilities provided by PEZA (Philippine Export Zone Authority). The government ought to emulate the Taiwanese export development model.

Does the government have to engage the services of SRI or a similar institution to get this country out of its trade-deficit quagmire? It doesn’t. The Department of Trade and Industry (DTI) has the resources to do the job. All that DTI has to do is to get off its backside and begin to deploy determination and creativity.

Topics: Rudy Romero , Taiwan , export trade
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