Philippines’ competitiveness and global financial meltdown: a question of Japan’s role

Abstract

The global financial crisis has affected all of Asia and hit the Philippine economy also hard. This is because global demand still represents a major factor behind Asia’s export growth. Indeed, the relationship between U.S. import growth and Asian intraregional export growth has actually become stronger over time. Japan shifted her stance from exporting industrial products to the U.S. and Europe to constructing manufacturing bases in Asia after the 1985 Plaza Accord. This started to create greater interdependence in Asia, with the development of a singlewide factory region. This paper explores the changing structure of the Philippines’ international trade and how the economy became so interdependent. How Japan has engaged in this development is also explained. By using measures like revealed comparative advantage and intra-industry trade, the Philippine economy is compared with other East Asian economies and found to possess similar trade structures with other East Asian countries. Suggested policy conclusion is to upgrade industrial structure, to make the structure different, and to use Philippines’ unique strength of mobile human capital. Japan needs to be prepared not only to absorb productions in this area, but must also open and enlarge markets for such mobile natural persons.

JEL classification: F14, F15, F16