The Role of Regional Cooperation in Fulfilling Philippine Development Vision
Panel 1: Inclusive Growth and the Role of Regional Cooperation
March 9, 2018
Distinguished guests and participants;
Ladies and gentlemen;
May I just say, at the onset, that the relationship between regional cooperation and inclusive growth has long been settled. It has been articulated, quite effectively, by Adam Smith, the founder of Modern Economics:
“As it is, the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the … extent of the market.” – Adam Smith (1776), The Wealth of Nations
Then again, I am getting ahead of myself. Allow me to backpedal.
First of all, what is inclusive growth?
I would say that the first operative term to consider is “growth.” It is about growing the pie. In other words, before achieving inclusive growth, there needs to be growth. And being inclusive means that many more are able to participate in the growth process, but all benefit from the growth.
– Those who want to work are able to find jobs. It is a matter of being available.
– Those who want to set up their own business are helped into doing so. It is a matter of being able to produce what the market demands, at the right price.
– And even if you did not participate in the growth process, say because you are too young, too old, differently abled, and so on, you still benefit from the growth.
In other words, inclusive growth is about economic growth that provides equal opportunities for individuals to reach their full potential.
Secondly, what is regional cooperation? Again, we have two words in this phrase.
– Region implies more than two countries are involved. Moreover, there is the feature of proximity, perhaps because it implies similarities in culture and even level of development, and preferences, to the extent that these are defined by geography and culture.
– Having more than two countries involved means that cooperation can go beyond across-the-border trade. It makes the strategy of a regional production network possible. Cooperation can also come in the form of crossborder investments and technology transfer.
– In other words, regional cooperation can expand the “extent of the market” and possible improve the efficiency of firms.
Can the Philippines benefit from regional cooperation? What is needed for regional cooperation to make growth inclusive?
The answer to the first question is obviously a “yes.” Currently, we are members of the ASEAN and the APEC. However, even in this regional grouping, we have an inherent disadvantage due to our geography. We even have a different cultural background from our ASEAN neighbors. For this reason, we need to take more initiatives towards cultural exchange. Promoting cultural tourism is also an effective way for foreigners to have a peek into our culture.
While regional cooperation makes possible the strategy of having regional production networks, the feasibility will largely depend on behind-the-border characteristics. In the end, the strength of a network is determined by its weakest link, and the weakest link always gets replaced.
This type of investments that form part of a regional production network is sometimes called efficiency-seeking investments; they go where there are opportunities to improve on the bottomline. And the key elements to attract these investments involve behind-the-border competitiveness of human capital, infrastructure especially utilitites, logistics and transport, and good governance. With the expansion of the market, there will be demand for more and better human capital, infrastructure, and governance institutions. And that will make for inclusive growth.
The key message is that regional cooperation does lead to inclusive growth, but not as a matter of course. Significant reforms and improvements need to be undertaken to be part of any regional cooperation, and as we do these, we achieve inclusive growth.
All these reform areas are considered comprehensively in the Philippine Development Plan 2017-2022. Strategies to improve human capital and competitiveness of production sectors are included in the second pillar “Pagbabago.” Good governance reforms are shared between the first pillar “Malasakit” and the second pillar “Pagbabago.” These are supported by a policy environment promoting strategic trade. Improvements in infrastructure are among the bedrock strategies.
As we strive to be part of, at least, a regional cooperation agreement, we need to mindful that we are doing this not just to expand the economy, not just to improve efficiency, not just to achieve inclusive growth. Our vision is for every Filipino to attain his AmBisyon for a “matatag, maginhawa at panatag na buhay.”
Mabuhay tayong lahat.