APEC’s epic fail: Philippine underdevelopment

May 26, 2015

by superadmin

Commentary | By Sonny Africa | The organization is unabashed in pushing for neoliberal policies, the biggest reason for the exclusion and worsening of conditions for so many in the world in the last decades

IBON Features—The “FuntaSea” theme of the show for Asia-Pacific Economic Cooperation (APEC) senior officials held last weekend and its venue, at Boracay’s premier resort Shangri-La Boracay, were inadvertently appropriate. They reflected what the Philippine government’s hosting this year of APEC appears to be grounded on: a certain amount of fantasy and exclusion.

World-famous Boracay was the venue for the most recent of the series of APEC meetings to be held in the Philippines this year which will culminate in the APEC Economic Leaders’ Meeting in November. The Summit meeting of APEC’s heads of state will be the Aquino administration’s last big international event before the May 2016 elections.

Pushing globalization

Year-round meetings are the lifeblood of APEC and important venues to push its aging and discredited agenda of 1990s globalization. These are well-attended by leaders, officials and other bureaucrats of APEC’s 21 member countries. Just concluded on the most exclusive resorts on the famed island of Boracay were the 10-day 2nd APEC Senior Official Meeting (or SOM2, after the first one wrapped up in Clark and Subic in February) and the 2-day APEC Ministers Responsible for Trade (MRT) meeting. Some 1,500 delegates reportedly attended.

The theme of the Philippine hosting of APEC in 2015 of “Building Inclusive Economies, Building a Better World” is a fantasy in coming from an organization that is unabashed in its push for neoliberal free market policies of globalization. More than anything else – even more than corruption – these policies have been the biggest reason for the exclusion and worsening of conditions for so many in the Philippines, Asia-Pacific, and the rest of the world in the last decades.

Founded in post-Cold War 1989, APEC has always been about pushing the globalization agenda so beneficial for the advanced capitalist economies, their biggest transnational corporations (TNCs), and their junior corporate partners in the Third World. In 1994 its member states committed to “complete the achievement of our goal of free and open trade and investment in the Asia-Pacific no later than the year 2020” with the industrialized economies achieving this “no later than 2010” and the so-called developing economies “no later than 2020”.

The 21 members constitute a large part of global economy at some 40% of the world population, around 50% of international trade, and up to 60% of global gross domestic product (GDP). Much of these are accounted for by its three biggest economic powers: United States (US), Japan and China.

There was a relative slowdown in APEC activity after the emergence of the World Trade Organization (WTO) and its agreements in the mid-1990s, upon the Asian crisis of 1997, and especially with the US distracted by its dot-com bubble and crash in 2000, as well as its “war on terror” after 2001. There has been renewed activity in APEC since the late 2000s though with the US giving greater attention to it in line with its pivot-cum-rebalance to Asia versus a rising China.

Positive-sounding economic analysis and mechanical use of textbook neoclassical economics is complemented with a heavy dose of GDP, foreign investment and export figures to make the whole pro-globalization package seem scientific and grounded in reality. Asia is reportedly becoming the world’s economic center of gravity with a dynamism unleashed by the removal of trade and investment barriers since the 1980s. This has supposedly resulted in development although the numbers for these, curiously, are not as forthcoming.

The Philippines in particular is portrayed as the poster child of this globalization-driven era of development, prosperity and progress. The Aquino administration is happy to promote this fantasy with relatively rapid GDP growth being its most consistent propaganda peg to claim political legitimacy amid all the controversies surrounding it. It is also quite willing to spend for the illusion.

The government will spend Php4.6 billion on its hosting of APEC this year which is almost as much as the entire Php4.8 billion international commitments fund budget last year (the budget item that APEC is charged to). This does not even include other budgets for improving airports, roads and tourism sites in and around APEC venues.

Boracay outcomes

What have the recent beach-setting meetings been about? APEC is not a negotiating platform that takes up and reaches binding agreements. Yet, it still has a significant influence in pushing economic policy changes. It provides not just the high-level political venues such as its leaders’ meetings but also has numerous, frequent and sustained technical meetings year-round. These have apparently gone far in facilitating and even pushing binding agreements in more formal negotiating venues such as the WTO, as its Director-General Roberto Azevêdo affirmed when he was in Boracay last week.

So it is meaningful, albeit predictable, that the trade ministers at Boracay this weekend reaffirmed their “commitment to promote trade and investment liberalization [and] building an open economy in the Asia Pacific region”. They also declared “the centrality and primacy of the multilateral trading system under the auspices of the WTO” and their support for concluding the WTO’s Doha round of negotiations. There were also additional steps towards eventually creating the Free Trade Area of the Asia-Pacific (FTAAP), specifically the groundwork in terms of the studies for this to be completed by 2016.

After some three decades already of globalization policies meant to deal with chronic crisis, there is by now much less to expect in terms of drastic changes to trade and investment policies. Liberalization has already advanced greatly and much of the trade- and investment-related work now is in its details.

The just concluded APEC meetings tackled opening up trade specifically in environmental goods and services. But it also took up such other matters as more aggressively bringing in micro, small and medium enterprises into big TNC-dominated global processes, rules of origin requirements, trade facilitation, global supply chains, connectivity, using information and communication technologies, developing a labour force attuned to TNC needs, regulatory coherence, and many others.

This is not to say that the new mega-deals on the horizon like the FTAAP and, looming larger, the China-centered Regional Comprehensive Economic Partnership (RCEP) and the US-centered Trans-Pacific Partnership (TPP) are not going to introduce anything drastic. On the contrary, the TPP for instance is unprecedented in its breadth and intrusiveness in national economies beyond the accustomed trade and investment liberalization free trade deals so far. Among others it meddles in government enterprises and seeks to give foreign corporations rights that override the breadth of government regulatory powers. This is aside from the strident defense of monopolies on technology and so-called intellectual property.

Philippine underdevelopment

Is APEC’s unrepentant and unrelenting advocacy of globalization justified? We can just take the case of the Philippines as an example. The country has been liberalizing recklessly since the 1980s and is the worst off for it.

The average most-favored nation (MFN) applied overall tariff today of a little over 6% is less than one-fourth of the rates of over 25% at the end of the 1980s. It is also lower than tariffs in neighbouring Thailand, Cambodia, Laos, Vietnam, and Indonesia and even lower than in economic powers South Korea and China. Foreign investors are allowed from 60 up to 100% ownership in all but a handful of sectors. There are restrictions in telecommunications, power, transport, agriculture, and mass media. But even if countries like Malaysia, Vietnam, Indonesia and China did not also have similar controls, the need for these restrictions for national development would still be there.

But what has globalization wrought in the country? Growth has certainly picked up from an annual average of 2% in the 1980s, to 2.8% in the 1990s, to 4.6% in the 2000s, to 6.3% in the period 2010-2014. The current 5-year average places the 2010s on track to being the second fastest decade of economic growth after the 7.1% clip in the 1950s. Foreign investment has also increased. The annual average stock of US$2.3 billion in the 1980s (around 6.2% of GDP) increased fourteen-fold to US$32.5 billion in 2013 (12% of GDP).

Yet the country’s production has dropped precipitously since the start of the 1980s. The country’s production sectors are composed of agriculture, manufacturing, construction, and mining and quarrying. These collectively accounted for around 60% of GDP in the pre-globalization decades 1950s, 1960s and 1970s. However their share in the economy started falling from 1980 upon World Bank structural adjustment programs and more and more trade and investment liberalization. The share of these production sectors fell to 57% in the 1980s, 52% in the 1990s, and 48% in the 2000s. Rebasing of national income accounts reduced this even more to 42% in the 2000s and to 39% in the period 2010-2014.

The Philippines is now a service and trading economy more than a producing economy. This is not to say that we have “leapfrogged” to a first world economic structure, as was argued by pro-globalization economists before, but rather that our third world backwardness has only intensified upon globalization.

This collapsed production is the reason why joblessness and poverty remain so stubbornly high. Employment generation was much more rapid in the pre-globalization era even increasing from an annual average of 2.7% growth in employment in the 1960s to 4.1% in the 1970s. This trend markedly reversed upon the globalization that APEC is still pushing so vigorously – slowing down to 2.8% in the 1980s, 2.4% in the 1990s and 2000s, and then to just 2.3% in the acclaimed rapid growth period 2010-2014. This poor performance in the last five years places the 2010s on track to being the worst decade of employment generation in the country’s history. Jobless growth is not just under the current Aquino administration but is a long-term structural problem.

The collapse of domestic production explains the poor job generation, which explains the record unemployment and exodus of overseas Filipino workers, and also explains the unremitting poverty. That all this is happening amid fantastic leaps in wealth of a few families and in profits of a few big domestic firms and foreign TNCs only underscores the structural exclusionary and inequitable nature of Philippine growth under globalization. IBON Features