Like all things in life, the government’s attitude towards various aspects of the Philippine economy’s management has undergone change. One aspect that has undergone a government-attitude change is the management of this country’s balance of payments (BoP).
The balance of payments is the aggregate of the balance of a country’s transactions with the world in goods and services (technically known as the current account of the BoP) and the balance of its transactions with the world in financial items (technically known as the capital account). The current account may be negative—when imports of goods and services exceed exports—and so may the capital account. Positiveness in both the current account and the capital account of the BoP is the objective of the country’s economic managers.
There was a time, not long ago, when a strong current-account position was a top government preoccupation and when the economic authorities made every effort to ensure that this country’s trade with the world in goods and services produced a surplus or was balanced at least. Trade promotion and export subsidies were the buzzwords of that day and the economic managers and their staffs wasted no effort to rally the Filipino people to the cause of economic development propelled by a vigorous export trade. The armory of government tools—fiscal incentives, monetary preferences and advisory services—was deployed to create new exporters and assist already-operating exporters. In a word, it was a time when exports were thought to be—and were pushed by the government as—the key to economic transformation and prosperity.
Today, in 2017, I no longer sense that atmosphere. I no longer discern keen government interest in pushing a strong-export-trade agenda, reinvigoration of established export industries and nurturing of new export industries.
In the decades immediately following World War II, right up to the 1970s, the development of this country’s economy was largely sustained by the Big Four export industries, namely, coconut products, sugar, wood products and mineral products (especially copper and gold). Of those four export industries only two—coconut products and mineral products—are still slugging it out in the world markets—no new major export industries have come forward to take the place of those that are no longer there. Once upon a time there was enormous interest in the GSP (Generalized System of Preferences) and bilateral arrangements for encouraging exports from developing countries; today one hardly hears from the government about such export facilitation mechanisms, which have proven to be highly beneficial to many Third World countries.
The reason for this diminution of interest, on the economic managers’ part in this country’s merchandise export trade can be summed up in one word: services. Exports of services have replaced merchandise exports as the principal generator of export revenues for this country. This transition from a merchandise-based export regime to a services-based export regime began with the departure of the first OFW (Overseas Filipino Worker) for ‘Saudi’—shorthand for the Middle East in the early 1970s. That was followed, in succession, by the development of electronic products industry and the BPO (Business Process Outsourcing) industry. Services have replaced merchandise-export production as the sector that keeps the Philippine economy afloat.
Proof of the reduction in the importance that the economic managers attach to the country’s merchandise account is their non-display of concern over the erratic performance of the export sector in recent years. Yet, they have been quick to express alarm every time that the figures for OFW remittances or BPO revenues had registered decreases.
Is the government doing the right thing in lowering the priority that it accords to this country’s merchandise export trade? I don’t think so. I offer two reasons. First, the export sector growth is a matter of addition, not substitution, and service exports should not be promoted at the expense of merchandise exports. Second, the structure of the world economy is subject to the forces of change and the streams of OFW remittances and BPO revenues could well weaken in the years ahead.
Summing up, Philippine merchandise export trade should be accorded once again the high policy making priority that it enjoyed in the not so distant past.
E-mail: rudyromero777@yahoo.com