Is Donald Trump good for the Philippines?
Yes, for two reasons. One, it has enabled President Duterte to backtrack on his hostility towards America and to gravitate back to the sphere of influence of Uncle Sam.
At the end of the day, as the cliché goes, the United States is still the best friend, protector and ally an emerging country like the Philippines can embrace in this troubled, uncertain, and rapidly disintegrating world.
Starting this year, the US is no longer the largest economy on earth, according to the World Bank ($20.85 trillion China, $18.56 trillion US); the International Monetary Fund ($19.52 billion China, $17.94 trillion US); and the Central Intelligence Agency ($19.51 trillion China, $17.97 trillion US). But it remains the most powerful nation on earth.
America has the biggest defense budget, the best military technology, the best and widest military alliance, the most number of guns and aircraft carriers, the best information technology and internet (its Silicon Valley makes mega-billionaires out of dropouts and billions out of garages), the highest share of the rich of total pre-tax income, the best film industry (which is a propaganda tool), and the best in access to advanced education. It is the biggest promoter of democracy and freedom and the most admired country in the world (according to Americans themselves and according to Filipinos). It is truly the home of the brave and the land of the free.
Wrote a New York Times columnist in 2014: “Sure, technically Norwegians may be wealthier per capita, and the Japanese may live longer, but the world watches the N.B.A., melts at Katy Perry, uses iPhones to post on Facebook, trembles at our aircraft carriers, and blames the C.I.A. for everything. We’re No. 1!”
Two, the 45th US President will revitalize the economy and trigger a Trump boom, at least in the short run. Such an economic expansion would spike demand for Philippines goods and services, create jobs for Filipino expats in America, and at least diminish the insularity of Americans afraid of losing their jobs to overseas competitors.
One reason for this expected boom is that Trump will force the repatriation back to America of some $2.5 trillion to $5 trillion of profits stashed by US corporations abroad. He will offer these companies vastly lowered tax rates to discourage, if not stop, profit refugees like FMC Technologies $1.949 trillion, Apple $200 billion, Microsoft $108 billion, Citigroup $45 billion, Oracle $38 billion, Amgen $32.6 billion, Qualcomm $28.8 billion, and Gilead Sciences $28.5 billion.
That money, if repatriated, hopefully should open up factories or businesses, create jobs, and put more purchasing power in the hands of American consumers. Since there are about four million Filipino-Americans, the same money should benefit them eventually.
Meanwhile, Albay Rep. Joey Salceda has sent a paper in which he frets about the Trump presidency.
“Trump presents essentially a risk of protectionism with its consequences mainly on first US economic growth and 2nd on the flow of trade and services, migration and remittances,” writes the congressman, one of the best if not the best and most inclusive-minded analyst in the Philippines today.
Based on Joey’s analytics, the biggest threats to the Philippines are (1) in economic aspects, these consist of impacts on robust BPO business with US at 5.7 percent of Philippine GDP (mainly trade), 2.8 percent remittance from US/GDP (mainly economic slowdown and deportation), and 4.5 percent export/GDP (trade/economic slowdown). These combine to 13 percent of the Philippine economy exposed to the US which makes it the second highest to Singapore. Moreover, exports to the US are mostly electronics and they have low GVA of 20 percent compared to BPOs and (constructively) remittances; (2) social costs of the deportation of 360,000 TNT or tago-nang-tago, although there are 3.4 million Filipinos in the US, 88 percent are legal and Trump is not against legal migrants.
The perceived kindred spirit of Duterte and Trump should prove useful in negotiating for Philippine economic interest—(1) No tax on outsourcing and no pressure on BPO principals, and (2) Pathway to citizenship for 360,000 undocumented Filipinos in the US or a more gradual process, say over 4 years.
1. Exports. Contrary to widespread perception, the Philippine GDP is only 4.5 percent (export/GDP) exposed to the US market, it is second least exposed compared to its neighbors with Indonesia being least exposed at 2.5 percent. Moreover, the Philippines has only a $1.5 billion trade surplus over the US aided by GSP preferences. Since exports to the US are mostly electronics and they have low GVA of 20 percent compared to BPOs and (constructively) remittances which are relatively small for the other Asean-5. This compares to Japan’s exports to the US accounts for 2.6 percent of Japan GDP in 2015.
2. BPOs. The US BPOs account for 5.7 percent Philippine GDP. US account for 77 percent of the $22 billion BPO sector (both as market and investor) which generated 1.1 million jobs in 2015. Trump wants to bring jobs back to home, as attempted before by President Obama possibly through a tax on outsourcing or simply through persuasive influence over BPO companies or the industries they cater to.
But this will be significantly countered by the Philippine competitive advantages:
a) neutral accent English;
b) competitive-trainable;
c) socio-cultural predisposition to western lifestyles;
d) hourly wage. A call center agent in the Philippines makes US$2.00. A call center agent in the US gets US$10.50.
3. Overseas Filipino remittances.
In 2015, remittances from the US amounted to $8.4 billion which increased by $1 billion over 2014’s $7.4 billion. This is equivalent to 2.84 percent of Philippine GDP. Based on BSP report, 32.8 percent of total OFW remittances in first eight months of 2016 originated from the US. While the figure includes remittance from other countries but coursed US-based correspondent banks and couriers which sadly cannot be disaggregated as to their ultimate source, it corresponds with the CFO estimate that 35 percent of Filipinos overseas are in the US.
This sector accounting to 2.8 percent of Philippine GDP may be affected by a slowdown in the US economy. During the 2008 financial crisis, remittances from the US fell by $502 million from $7.83 billion to $7.32 billion whereas in the Asian financial crisis, it prompted a spike from $4.11 billion to $6.4 billion!
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