Globalization: Philippine’s Overview and our Path Onward

Globalization just hit the world and skyrocketed businesses into booming success. Who would have ever thought that this thing could change how we do business. First things first, let us discuss what is globalization. According to Investopedia it is the spread of products, technology, information, and jobs across national borders and cultures. In economic terms, it describes an inter-dependence of nations around the globe fostered through free trade. Globalization motives are idealistic, as well as opportunistic, but the development of a global free market has clearly benefited large corporations based in the Western world. Its impact remains mixed for workers, cultures, and small businesses around the globe, in both developed and emerging nations.

With this, we now see competition across countries on different products, services and are racing to develop new and faster technologies among each other. The opportunity of increased growth and raising standards of living especially in the less developed countries. This means that third world countries can now compete with low cost but with higher quality but on the other side, first world countries could lose job opportunities for their citizens due to higher cost of production.

Now, let us discuss how globalization changed our country and what is our current standing among our neighboring countries and other regions in the world. We can see that as of today, our country’s potential on becoming a highly globalized country is yet to become true but the efforts thru the collaboration of government and non-government organizations really helped in achieving our current stand in terms of globalization. The Philippines is the second top globalization destination in the world last year, according to global strategic advisory firm Tholons. The 2018 Services Globalization Index saw the Philippines rising to the second spot of the 'Top 50 Digital Nations' after placing third last 2017 (Merez, 2018). This shows that we are still among top countries that investors choose to have their business and/or to outsource their businesses.

One good example will be the Business Process Outsource industry (BPO) which Kyle Edriel Tomagan forecasted that we will still remain as the “BPO Capital of the World”. Forecasts for 2019 reflect the continued interest of multinational BPO providers in the Philippines. From driving demand for private offices in the Philippines to manpower and virtual staff requirements, this coming year is going to be a pivotal point for the Philippine IT-BPM sector. (Tomagan, 2019)

Impact of Globalization in Agriculture

Globalization is war, war among the most efficient and competitive. However, the most efficient and competitive industries in the world happen to be the ones enjoying government support and assistance from their own government. For examples: EU agricultural producers get support from the CAP and European phyto-sanitary standards, US farm sector receive annual subsidies from the US Farm Policy, and Thai farmers are guaranteed price support, subsidies and myriad government assistance. In the case of the Philippines, similar support programs for the farm sector – irrigation, credit, market assistance, etc. – are either missing or are getting paltry budgetary allocations, or worse, even hijacked by the con artists inside and outside the bureaucracy. (Ofreneo, 2017)

With the passage of RA 11203 also known as “An Act liberalizing the importation, exportation, and trading of rice, lifting for the purpose the quantitative import restriction on rice” The law seeks to amend Republic Act (RA) No. 8178 or the Agricultural Tariffication Act of 1996 and replace the quantitative restriction (QR) on rice imports. Instead of limiting how much rice will enter the country, rice imports will just be slapped with a tariff. Rice from Southeast Asian countries will pay a 35% tariff or the import duty rate commitment of the Philippines for rice importation, pursuant to the ASEAN Trade in Goods Agreement. This law seeks to lower the price of rice in the Philippines by allowing additional volume of rice to be imported in our country. As a son of a farmer, I can see that this law has negative impact on the local agriculture side as this create an additional burden to local rice farmers. Should the market price of the rice will reduce due to volume in supply, the income of our small farmers will be reduced. Just last March 8, 2019, the Philippine Statistics Authority (PSA) released the updates on the farmgate price of palay for the fourth week of February 2019 and it went down by 0.41% from Php 19.63/kg to Php 19.55/kg. Likewise, it dropped by 2.40% from previous year’s same week level of Php 20.03/kg. (PSA.GOV.PH, 2019)

This is not a good news for small local farmers, as I have mentioned their income will be reduced while the cost of their expenses will continue to increase. The government should have first assessed the aide that farmers are receiving from the government. Subsidies, irrigation projects and technological support should have been prioritized first before the enactment of this law. Such things that will help our farmers to boost their income before slashing their opportunity to bring home additional money for their families.

Globalization could have been a great help for our local agriculture sector, however, it seems that technologically we are still far behind our competitors. As the global war is continuing, I do hope that our government through its programs and projects will add additional support to our hardworking farmers.

Impact of Globalization in Education

We all knew that the reason behind the passage of the K-12 law is to boost the education quality in our country. Among the Association of Southeast Asian Nations (ASEAN), Philippines was the last to implement additional years to basic education. Before the passage of K-12 here’s the total number of years of basic and pre-university education in the ASEAN countries: Brunei: 15 years; Cambodia 13 years; Indonesia: 13 years; Laos: 13 years; Malaysia: 13/14 years; Myanmar: 12 years; PHILIPPINES; 10 YEARS; Singapore: 12 to 14 years; Thailand: 12 years; Timor: 12 years; Vietnam: 14/15 (Cruz, 2015)

Four years after the article was written, I can see that the benefits of this K-12 law is highly applauded. The additional 2 senior high school years prepares the students to hone their skills in the field that they wish to enter for their college degrees. Also, with the partnership with Technical Education and Skills Development Authority (TESDA) the Department of Education (DepEd) created a curriculum that will help our students to become employable upon finishing their senior high school. With the partnership with different industries, graduates can now apply for certain jobs that requires skills they mastered. This laws will help us to become ready in terms of competing with the international labor forces especially that the ASEAN integration is happening. Our co-ASEAN family will be uniting together to create multiple jobs and globally prepared citizens that will boost our economy in general.

Impact of Globalization in Business and Economy

The Philippines’s extensive economic integration at a regional and global level has been an important factor in the country’s economic revival over the past years. As one of 10 members of the Asean Economic Community (AEC), which was launched on the December 31, 2015, the country stands to benefit from access to a single market of over 600 million consumers and an increasingly integrated regional economy, including the free movement of skilled workers and products. The Philippines is also party to a number of agreements that aim to support AEC realization, including the Asean Trade in Goods Agreement, the Asean Framework Agreement on Services and the Asean Comprehensive Investment Agreement. By April 2016, the Philippines had achieved a 92.1-percent implementation rate of commitments under AEC, which translates to 466 of 506 commitments in absolute terms. (Schumacher, 2016)

In essence, trade barriers being erected by major economies around the world was jeopardizing the economic recovery of everyone and their effects are already starting to show. The WTO found that G20 countries introduced 39 new trade restrictions between mid-October last year and mid-May this year, double the rate in the previous period, affecting trade in iron and steel, plastics and vehicles.

“The marked increase in new trade restrictive measures among G20 economies should be of real concern to the international community,” Mr. Azevedo said, adding that more restrictions had been put in place in the weeks after the period under review ended. In spite of this, emerging economies like the Philippines are rising to the occasion, defying naysayers and putting forward hope in a somber world. In Bloomberg’s New Economy global survey released last October, which interviewed 2,000 business professionals in 20 markets, it showed that 63% of respondents coming from emerging economies expressed confidence in the future of global trade, a far cry from the 36% of respondents from developed economies sharing the same sentiment.

Such a stark difference is not insignificant. Bloomberg Chief Economist Tom Orlik said that for emerging markets, the costs of looming tensions in international trade perhaps could be less than expected. (Beltran, 2018) Our economy has been doing a lot of progress ever since. In a journal published on 1999, Japan Research Institute stated that the Philippines was more resilient to the Asian crisis compared to its Asian neighbors, since most of the loans went to the productive sectors of the economy, its financial system was more robust, and available credit to businesses did not contract to the same extent as its neighbors. Its export growth is also strong, as it has stronger trading ties with the United States. Finally, it has a large overseas workforce remitting foreign currency that more than covers its present interest payments on public debt. (Mijares, 1999).

According to Macaranas, having a major financial market disruption in the Philippines is less likely to happen because of the stable macroeconomic fundamentals set by Central Bank of the Philippines, including monetary and fiscal policies. For example, the Philippines has managed to maintain its annual inflation rates between the ideal 3-5% margin for the last eight years. This means that the Central Bank has been effective in managing the financial risks and establishing the foundations of the country’s macroeconomy. (Macaranas, 2017)

Globalization has had more positive effects than negative effects in the Philippines. Their balance of imports and exports has strengthened their economy. In addition, the surpassing value of imports compared to exports shows that the Philippines receives more resources than they lose. Globalization can be related to social development, cultural, or economic. In this case, economic globalization has had the biggest impact. As evidenced by the total value of imports surpasses the total value of exports. With the total value of imports being $59.9 billion and the total value of exports being $50.72 billion, this $9 billion difference definitely benefits the economy. This discrepancy benefits the economy because the Philippines is receiving more goods rather than losing goods through exports. Their primary exports include semiconductors and electronic products, petroleum, transport equipment, garments, copper products, coconut oil, fruits, and vegetables. These exports are mainly sent to the United States, Japan, Netherlands, Hong Kong, Germany, China, Singapore, and South Korea. Contrastingly, the major goods the Philippines imports from other countries are electronic products, mineral fuels, machinery and transport equipment, iron and steel, textile fabrics, grains, chemicals, and plastic. Most of our import partners are the same as our export partners; however, we import goods from Taiwan and Thailand as well. (Afranke1Philippines, 2014)

Conclusion

There will always be two side of the coin and with globalization, we can say that there will also good and back effect for our country. As an emerging economy, all support and development that we can attain from our global ties is a very much needed in order to become globally competitive. With the development programs such as Arangkada Philippines which will help boost our economy and the Sustainability Program of National Economic Development Authority (NEDA), I can see a better future for our country. Having a direction on what we want is a very good sign that we are growing and strengthening our aptitude in order to compete with the “globalization war”. One thing for sure is certain, change is imminent and there’s nothing we can’t do to stop it. Just like in investment and portfolio classes that I have attained, this is somewhat close to the unsystematic risk for investor, it is still a risk but with proper analyzation, interpretation and correct action such as diversification of investments we will still have gain. Applying in globalization, with proper roadmap prepared by our government and with the support of all Filipino people this changes and global challenges can become easier to bear, as long as our bayanihan attitude our still present in everyone’s heart. As we are all known in our culture of being warm and always smiling, I can see a better nation ahead of us.

References

Afranke1Philippines. (2014, October 29). GLOBALIZATION: GOOD OR BAD? Retrieved from http://afranke1philippines.weebly.com/blog/globalization-good-or-bad

Beltran, B. B. (2018, November 28). Global trade and the Philippine economy. Retrieved from Business World: https://www.bworldonline.com/global-trade-and-the-philippine-economy/

Cruz, E. S. (2015, March 15). Phl needs K to 12 now. Retrieved from Philippine Star: https://www.philstar.com/opinion/2015/03/15/1433801/phl-needs-k-12-now

Macaranas, F. M. (2017, May 30). Managing the Next Financial Crisis: The Impact in the Philippines. Retrieved from Global Network Perspectives: http://gnp.advancedmanagement.net/article/2017/05/managing-next-financial-crisis-impact-philippines

Merez, A. (2018, October 20). Philippines is world's second top globalization destination: index. Retrieved from ABS-CBN NEws: https://news.abs-cbn.com/business/10/20/18/philippines-is-worlds-second-top-globalization-destination-index

Mijares, R. (1999, March). Philippine Resiliency to the Asian Financial Crises. Retrieved from Japan Research Institute: https://www.jri.co.jp/english/periodical/rim/1999/RIMe199902philippines/

Ofreneo, R. E. (2017, July 19). Agrarian crisis: Winning, losing under globalization. Retrieved from BusinessMirror: https://businessmirror.com.ph/2017/07/19/agrarian-crisis-winning-losing-under-globalization/

PSA.GOV.PH. (2019, March 8). Updates on PALAY, RICE, AND CORN PRICES FOURTH WEEK OF FEBRUARY 2019. Retrieved from Philippine Statistics Authority: https://psa.gov.ph/sites/default/files/updates%20on%20palay%204th%20week%20february%202019.pdf

Schumacher, H. J. (2016, December 7). Philippines: Part of international economic integration. Retrieved from BusinessMirror: https://businessmirror.com.ph/2016/12/07/philippines-part-of-international-economic-integration/

Tomagan, K. E. (2019, January 4). FORECASTS FOR PHILIPPINE BUSINESS PROCESS OUTSOURCING IN 2019. Retrieved from Workspace in Asia: https://workspaceinasia.kmc.solutions/bpo-investment-in-the-philippines-2019