Bernardo M. Villegas
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Lessons from the Tiger Economies (Part 2)

          In the trade war that is raging between China and the US, the Philippines is expected to relatively remain unscathed.  The tigers, as pointed out by The Economist, are more exposed to the damage because they are smaller and more open.  In China, exports are worth about 20% of GDP.  In the Philippines about 30%.  In South Korea, it is more like 45%; in Taiwan, 65% and in Singapore and Hong Kong, closer to 200%.  Thanks to our low export to GDP ratio, the expected slowdown in global trade in 2020 and beyond will hardly have a negative impact on our GDP growth.  As expected by most analysts, the Philippine economy can continue to grow at 6.5 to 7.0% in 2020 and beyond.  We should, however, follow the example of the tiger economies in diversifying our customers and our products.  Taiwan has been pushing its companies to explore emerging markets other than China.  South Korea’s government is keen to promote a wider range of products.  One possibility is for the Philippine agricultural sector to diversify more into high-value crops like cacao, coffee, palm oil, rubber, mangoes and other fruit trees so that these new products can follow the success stories of banana and pineapple in which the Philippines is one of the major exporters in Asia.  This means radically changing our approach to agrarian reform by reversing the fragmentation into small farms but instead consolidating the small farms into bigger units by using models like those of the Malaysian nucleus estates or of the cooperatives in which Taiwan and South Korea were successful.

         In fact, there is much that we can learn from the agricultural development of Taiwan.  Despite its very limited agricultural resources, it was able to implement a very successful agrarian reform program because its Government was able to literally shower the owners of small farms with all the infrastructures they needed, such as farm to market roads, irrigation systems, post-harvest facilities and agricultural extension services.  Despite the small sizes of their farms, the Taiwanese farmers were able to attain very high productivity in producing high-value crops like fruits, vegetables and livestocks.  In fact, through local joint venture companies like Harbest, Taiwanese technology in producing fruits and vegetables is already being widely dispersed among our farmers, especially with the help of the Kapatid-Agri Mentors program of the Go Negosyo movement headed by Joey Concepcion.  A food for thought for our sugar industry was the fact that despite a very thorough going distribution of large tracts of land to small farmers during the authoritarian government of Chiang Kai Sek, the Taiwanese had enough common sense to exempt the sugar industry and allowed the sugar farms to remain large because of the obvious economies of scale needed in modern sugar farming.  It is not too late for the Philippine sugar industry to attain these economies of scale by adopting creative ways of reconsolidating the fragmented sugar farms through the nucleus estate model, cooperatives and other ways of separating the ownership of land from the actual cultivation and management of the farms.  Another model for agricultural development could be the Saemaul Undung movement in South Korea during the time of Park Chung Hee under which the National Government provided local communities with the necessary resources to build the rural infrastructures that are indispensable for raising the productivity and profitability of small farms.   I am sure a good number of our rice farmers would be willing to diversify their production into high-value vegetable and fruit products if they are given access to the necessary infrastructures and technical advice by the State and civil society.

         We may also follow the lead of the four tigers in counteracting the current global trend towards protectionism and ultra-nationalism by cooperating in the promotion of regional trade agreements.  Before 2000 the tigers were party to only five regional trade agreements; today they have joined 49 more.  Singapore was an originator of both the Trans-Pacific Partnership ( a trade agreement that aimed to join America, Japan and ten other Pacific Rim countries) and what was considered its rival, the Regional Comprehensive Economic Partnership, which includes China.  The Philippines should be at the forefront of making the ASEAN Economic Community a reality, especially focusing on closer economic relationships with the two other giant economies in Southeast Asia, i.e., Indonesia and Vietnam. There should be continuing efforts to forge bilateral free trade agreements with countries in the Asia Pacific region, including some major Latin American countries like Mexico, Peru, Chile, Argentina and Brazil.

         The process of learning from the tigers should include not only following their paths but more importantly implementing what is known as “catch up” economics.  We cannot always assume that we will just take over what they are abandoning because of their lack of human or natural resources.  Our goal over the next two decades should be to match the modern infrastructures and enabling institutions prevailing in the four tigers.  These are good infrastructures, from ports to internet; openness to trade; highly educated workforces; and high spending on research and development.  We should, however, aim higher by trying to catch up with them and even surpass them over the next two decades. This would require our finding ways in which we can compete with them in promoting innovation.  Take Taiwan, for example.  As the Special Report of The Economist observed: “Taiwan has one of the world’s most robust frameworks to encourage lending to small- and medium-sized enterprises (SMES), the kinds of firms that have ideas but few resources.  It combines a centralized information-sharing system about company performance with a menu of credit guarantees, giving banks more confidence…Singapore has created a large demonstration factory that gives SMES access to state-of-the-art 3D printing and robotic equipment.  Similar facilities exist in Hong Kong.  If an entrepreneur has a brilliant idea, they no longer need a giant dollop of capital to bring it to life.”  These are examples that can be emulated by our government agencies like the Department of Trade and Industry, the Department of Agriculture and the Department of Science and Technology.  (To be continued).