trade portfolio and historical trade flow analysis between the philippines and the association for...

Trade Portfolio and Historical Trade Flow Analysis: Philippines and Association of South-East Asian Nations

In Partial Requirements for International Trade

Written by: Ranelle Jasmin Asi

Aljanet Jandoc

Submitted to: Dr. Marissa Maricosa Paderon

Director European Studies Program

March 25, 2015

HISTORICAL BACKGROUND

Association of Southeast Asian Nations (ASEAN)

The ASEAN community is composed of ten members: Brunei, Cambodia, Indonesia, Lao PDR,

Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. The union was established on August

1967 under the ASEAN declaration or Bangkok Declaration which was initially composed of five

countries (including the Philippines). By 1999, the community becomes complete with five additional

countries.

ASEAN was formed for beneficial purposes. The countries involved in the community wanted to flourish

their economy or linkages by collaborating with the others. By doing so, not only trade will increase, but

also other forms of assistance for development. Training, research facilities in the educational,

professional and technical areas are also provided to other members that would require more help in those

fields. Trade, communications, and living standards of countries that need further development will be

pulled up due to the collaboration. In conclusion, the community gains from the assistance of each

member which maintains a beneficial cooperation.

PHILIPPINES

The Philippines is one of the five founding members of the ASEAN community and is classified

as a middle-income country that is currently experiencing a rapid growth where it was labelled as the

rising tiger of Asia. By 2012, the country’s GDP grew by 7.1% which completely surpassed economists’

forecasts. Due to this situation, opportunities for industry growth emerged which gravitated investors to

business process outsourcing, electronics, agriculture, renewable energy, infrastructure and shipbuilding.

Amidst the strong growth, the Philippines is still faced with major problems. The country becomes

vulnerable to external crises due to its outward-orientation or trade dependence which rely heavily on

manufactured products. There is no trade diversification and foreign direct investment inflows.

Figure 1a: Philippine Trade and Growth Rates (1970-2012) in US $ Million

Source: http://unctadstat.unctad.org/

From Figure 1a, the Philippine’s growth of trade is almost consistently increasing where the

imports and exports are almost similar in pattern. The sudden decrease in 2008-2010 was caused by a

financial crisis but the Philippines quickly recovered by 2012 when GDP jumped over growth

expectations.

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http://unctadstat.unctad.org/

Figure 1b: Total Trade of Philippines with Major Partners

Source: http://unctadstat.unctad.org/

Figure 1b above shows which bloc the Philippines trade the most during 1996 to 2012. Initially,

majority of the Philippines’ trade was with the United States, Japan and Europe. By 2002, trade with

ASEAN countries quickly rose up due to the official implementation of the community which eventually

surpassed the other trading blocs by 2004 or 2005.

Figure 1c: Philippines’ Unemployment Rate, Inflation Rate, and GDP annual growth

Source: www.wits.worldbank.org

Figure 1c shows the unemployment rate gradually going down to level almost near the inflation

rate. GDP’s growth noticeably increased from around 2002 until the sudden dip at around 2008 and 2009.

By 2012, GDP soared up again.

For 2013, Japan, United States and China have the biggest share of Philippines exports. Out of

the 9 ASEAN country partners, only Singapore has high demand for imports from the Philippines which

is 7.44 percent share as seen below.

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http://unctadstat.unctad.org/

http://www.wits.worldbank.org/

Figure 1d. Share to Total Philippine Exports, by Major Country of Destination, 2013

Source: World Integrated Trade Solutions

Table 1. Philippine Exports by Major Commodity Groups (FOB value in million US$)

Commodities 2000 2004 2008 2009 2012

% to Total

(2012)

Total Export to the World 37,757 39,681 49,078 38,436 51,995

Coconut Products 570 716 1,348 801 1,364 2.62%

Sugar and Products 57 79 80 112 177 0.34%

Fruits and Vegetables 534 601 735 701 1,205 2.32%

Other Agro-Based Products 493 476 612 529 807 1.55%

Forest Products 1/ 42 34 34 33 59 0.11%

Mineral Products 650 796 2,498 1,470 2,265 4.36%

Petroleum Products 436 380 1,240 293 465 0.89%

Manufactures 34,360 35,525 40,999 33,605 45,067 86.68%

Source of basic data: National Statistics Office

For 2012, ranking first is the share of manufacturing which comprises 88 percent of total

Philippine exports. This is consistent from time period 2000 to 2012. Under this commodity, electronic

products constitute half of the country’s exports.

Mineral and coconut products rank next to manufacturing but the distribution shares are already

insignificant relative to manufacturing. Furthermore, sugar and products which are included in the

sensitive list shows insignificant shares relative to other given commodities.

Table 2. Manufactured Commodity Exports (Share to Total Exports)

Commodities 2000 2004 2008 2009 2012

% to Total

(2012)

Electronic Products 26,754 26,722 28,502 22,182

22,557 43.38%

Other Electronics 1,004 1,145 1,426 1,417 2,433 4.68%

Garments 2,563 2,171 1,952 1,541 1,594 3.07%

Textile Yarns/Fabrics 250 238 194 147 170 0.33%

Footwear 76 34 31 22 16 0.03%

21%

15%

12%8%

7%

37%

Japan

United States

China

Hong Kong, China

Singapore

Others

Travel Goods and Handbags 177 39 95 66 60 0.12%

Wood Manufactures 212 122 918 821 2,159 4.15%

Furnitures and Fixtures 381 294 221 138 180 0.35%

Chemicals 328 448 1,130 978 1,943 3.74%

Non-Metallic Mineral

Manufactures 134 165 211 156 145 0.28%

Machinery & Transport

Equipment 714 1,604 2,116 1,950 5,314 10.22%

Processed Food and Beverages 278 498 943 987 1,447 2.78%

Iron and Steel 25 58 263 124 253 0.49%

Baby Carrier, Toys, Games and

Sporting Goods 165 128 143 128 239 0.46%

Basketwork, Wickerwork, and

Other Articles ofr Plaiting

Materials 95 67 42 38 43 0.08%

Misc. Manufactures Articles,

n.e.s 219 234 331 291 1,534 2.95%

Others 985 1,559 2,480 2,618 4,979 9.58%


Figure 1e. Distribution of Philippine Imports by Commodity Classification, 2012


47 percent of the Philippine commodity import from the world comprises of raw materials and

intermediate goods used in industries, followed by mineral fuels and lubricant, and capital goods.

19%

47%

21%

12%

1% Capital Goods

Raw Materials and IntermediateGoods

Mineral Fuels and Lubricant

Consumer Goods

Special Transactions

Table 3. Philippine Major Trading Partners: 2012 (F.O.B. Value in Million U.S. Dollars)

Country

Imports from

Value % Share

Total 62,128.66 100.0%

Total of Top Ten Countries 45,192.27 72.7%

1. Japan 1/ 6,469.60 10.4%

2. United States of America 2/ 7,123.94 11.5%

3. People's Republic of China 6,680.35 10.8%

4. Singapore 4,405.07 7.1%

5. Republic of Korea 4,525.95 7.3%

6. Taiwan 4,855.25 7.8%

7. Hong Kong 1,465.66 2.4%

8. Thailand 3,461.41 5.6%

9. Indonesia 2,766.54 4.5%

10. Saudi Arabia 3,438.51 5.5%

11. Others 16,936.39 27.3%


1/ includes Okinawa

2/ includes Alaska and Hawaii

Note: Components may not add up to total due to rounding

Table above shows that the top 3 origins of Philippine imports based on percentage share are United

States, China and Japan in that order. Amongst the ASEAN member countries, Singapore, Thailand and

Indonesia are included in the top 10 list.

Table 4. Major Philippine Imports from EU and ASEAN: 2012 (F.O.B. Value in Million U.S.D.)

Economic Bloc/Commodity Value % Share

European Union (EU) 4,643.41 100.0%

Electronic Products 1/ 1,389.85 29.9%

Transport Equipment 681.10 14.7%

Industrial Machinery and Equipment 445.77 9.6%

Medicinal and Pharmaceutical

Products 390.21 8.4%

Paper and Paper Products 125.55 2.7%

Association of Southeast Asian

Nations (ASEAN) 14,208.48 100%

Electronic Products 1/ 3,361.64 23.7%

Mineral Fuels, Lubricants and

Related Materials 2,514.38 17.7%

Transport Equipment 1,668.39 11.7%

Plastics in Primary and Non-Primary

Forms 644.72 4.5%

Industrial Machinery and Equipment 507.10 3.6%


In 2009, Singapore is the origin of electronic products, mineral fuel and lubricants, and industrial

machineries and equipment from 2009 up to 2010. Thailand is also one of the ASEAN import sources of

electronic products and transport equipment (NSO).

Table 5. Distribution of Total Philippine Trade with Major Partners/bloc, 1986-2012

Year Japan US China Europe ASEAN

1996 20.63 25.32 2 13.7 12.8

1997 19.13 25.95 1.92 14.23 13.08

1998 17.41 27.96 2.74 14.75 13.54

1999 16.18 24.82 2.44 14.07 13.67

2000 16.13 22.89 2.03 13.38 15.31

2001 17.03 21.01 2.73 13.91 14.76

2002 16.42 20.94 3.42 12.45 15.82

2003 17.56 18.97 5.17 12.06 17.51

2004 18.25 18.05 6.19 12.72 18.16

2005 17.27 18.49 7.95 12.39 18.16

2006 15.37 17.14 8.37 13.5 18.63

2007 13.39 15.41 9.2 13.36 19.81

2008 13.54 14.57 9.16 12.47 20.5

2009 14.2 14.57 8.3 13.98 20.77

2010 13.76 12.6 9.67 11.02 25.31

2011 13.75 12.18 11 10.74 20.56

2012 13.93 12.39 10.95 10.19 20.47

Source of basic data: 1996-2010 Comtrade, 2011-2012 DTI

From 1990s to present, majority shares of Philippine trade were conducted with United States and

Japan but respective shares are declining overtime. Noticeably is the increasing growth of Philippine trade

with ASEAN overtime

HISTORICAL TRADE FLOW ANALYSIS

Figure 2a: Philippines’ Export Propensity and Import Dependence with ASEAN


Philippines’ import dependence is decreasing from 2010 to 2013 while the export propensity

started increasing. This shows that the Philippines is currently in a good position since the country doesn’t

depend too much on the products from other countries and exports for goods are high.

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Import dependence (M/GDP)

Export Propensity (X/GDP)


Figure 2b: Growth rates of imports and exports


The import growth rate is steadily decreasing and has reached a negative number. Although the

export growth rate had a deep fall from 2010 to 2011, it is going back up again by 2013 which somewhat

adds up with what we analyzed from Figure 2a.

Table 1: Top products for trade and revealed comparative index

Product label 2001 2002 2003 2004 2005 2006 2007 2008

Vegetable

plaiting

materials,

vegetable

products

0.246 0.265 0.189 0.103 0.148 0.358 0.425 0.62

Lac, gums,

resins, vegetable

saps and extracts

3.504 3.01 3.676 4.093 3.139 3.144 4.732 6.194

Electrical,

electronic

equipment

3.374 3.655 3.707 3.725 3.621 3.46 3.361 3.527

Manufactures of

plaiting material,

basketwork, etc.

14.575 11.017 10.491 9.88 12.778 12.561 7.476 5.695

Edible fruit,

nuts, peel of

citrus fruit,

melons

2.791 2.721 2.828 2.78 2.948 3.084 3.005 3.436

Source: www2.econ.uu.nl/users/marrewijk/research/balassa.htm

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Export Growth Rate

Import Growth Rate


These are the top five products that the Philippines have a comparative advantage in with respect

to ASEAN countries. The highest RCA is for manufactures of plaiting material or basketwork, second is

lac, gums, resins, vegetable saps and extracts, third for electrical and electronic equipment (which is the

highest RCA when Philippines is compared to the world).

Table 2: Comparison between ASEAN Countries (Balassa Index or RCA)

Comparison between ASEAN Countries (Balassa Index/RCA)

2001 2002 2003 2004 2005 2006 2007 2008

Vietnam

Vegetable plaiting materials, vegetable products nes 12.922 7.882 6.119 5.275 4.215 5.062 3.029 2.286

Lac, gums, resins, vegetable saps and extracts nes 1.178 0.599 0.603 1.07 1.372 1.112 0.522 0.343

Singapore

Manufactures of plaiting material, basketwork, etc. 0.032 0.027 0.026 0.036 0.033 0.031 0.027 0.026


Malaysia



Indonesia



Thailand



Philippines



Source: http://www2.econ.uu.nl/users/marrewijk/research/balassa.htm

http://www2.econ.uu.nl/users/marrewijk/research/balassa.htm

We compare the Philippines with othe ASEAN countries. We can see that the Philippines has a

condiderably higher RCA in terms of plaiting products compared to the others. At this point, our results

partly conclude that the Philippines should focus on producing and trading these products next to

electronics. The authors recommend to identify which ASEAN countries has demands for these products.

Figure 2e: MFN Simple Average % for all products


The figure above proves the benefit that the Philippines and other ASEAN countries gained from

joining the community. By 2002 or around the time ASEAN was officially implemented, tariffs

decreased for most of the countries. The lowest drop was for Vietnam, Thailand and Philippines. Tariff

for the Philippines went up again by 2004 but is still considerably lower than the initial position.

POLICY ISSUES

Labour Mobility and Migration

Labour migration is already a reality in ASEAN with millions working in other member states

both legally and under irregular conditions.

Net senders for labour: Cambodia, Lao Democratic People’s Republic, Myanmar, Indonesia, Viet

Nam and the Philippines. Net receivers: Singapore, Thailand, Malaysia and Brunei Darussalam

(Capannelli, 2013). Philippines is a major labour exporter, but the majority of Filipino labour migrants go

outside the ASEAN region. Top migration destination is the United States with more than 2 million

permanent migrants. Flows of skilled labour in ASEAN have increased but remain small in comparison to

the unskilled or semi-skilled labour migration. The majority of emigrants have only primary education.

In Indonesia, Myanmar, Cambodia, Thailand and Lao PDR, unskilled migration outstrips skilled

migration significantly.

Child Labour

According to Heyman and McNeil (2013), “Many Asian countries, particularly in East Asia and

the Pacific, have experienced strong economic growth in recent decades. This has important and positive

consequences for children and families, who have more resources at their disposal to meet and surpass

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Philippines

Singapore

Thailand

Vietnam


basic needs. However, the region has few protections for those children and families left in poverty

compared to most of the world. Together, the economic and social policy conditions may contribute to

widening gaps in the experiences of children and families.”1

Poor children are less likely to attend school but more likely to labor due financial constraints, performing

hazardous works that are damaging children’s health (Heyman and McNeil, 2013).

Table_ Regional Highlights

Hazardous Work 3 countries in East and the Pacific have no national

minimum age for hazardous work; an additional 10

countries in this region permit hazardous work

before a child turns 18

Full-Time Work 5 countries in East Asia and the Pacific and 3 in

South Asia permit children as young as 13 to work

full-time

Applying the Balassa Index for 2008, the country’s strong position in exporting commodities with

other trading partners coincides with the industries where these poor children are working. There are

about 40,000 children who are performing the worst forms of Child Labor such as mining, quarrying,

deep sea fishing and agricultural work. Notably, children laborers exposed in commercial sexual

exploitation and overseas domestic employment.2

Philippines is a source of children trafficked for commercial sexual abuse to neighboring

countries such as Malaysia, Singapore, Hong Kong, South Korea, Japan and Middle East. It is also the

largest in the world earning more than US$ 1billion a year from child pornography operated in the

country by foreign nationals from Japan, America, Australia, and Britain (Women and Gender Institute

[WAGI], 2012).

Based on 2011 NSO Survey, there are 5.492 million working children ages 5 to 17 years old and

out these working children, 3.210 million are child laborers. Of the 3.210 million, 2.99 million are in

hazardous labor.3

CONCLUSION

Joining the ASEAN community garnered benefits for trade such as decreased tariffs to improve

trade relations with other countries and increased economic growth which can attract foreign investors.

From the data in the paper, the Philippines mainly focus on exporting manufactured goods and electronics.

From the computed revealed comparative index or balassa index, the Philippines has an advantage in

producing plaiting materials and vegetable products compared to other ASEAN countries. The

researchers conclude that the Philippines should produce and export what they have an advantage in

instead to maximize production and trade. The underlying problem here is that the authors could not

gather data on what countries have high demand on plaiting materials.

1 Heymann, Jody and Kristen McNeil. 2013. Changing Children’s Chances: New Findings on Child Policy Worldwide. Los Angeles: University of California, Los Angeles (UCLA). (pp.2-27) 2 Women and Gender Institute [WAGI]. 2012. “National Situationer of Girl Children in the Philippines.” Quezon City: WAGI, Miriam College. 3 National Statistics Office. (2012). 2011 Survey on Children

BIBLIOGRAPHY

Association of South East Asian Nations Website. February 10, 2012.

http://www.asean.org/news/item/macroeconomic-indicators (accessed March 11, 2015).

Balassa Index. http://www2.econ.uu.nl/users/marrewijk/research/balassa.htm (accessed January 2015).

Department of Trade and Industry. www.dti.gov.ph/ (accessed January 2015).

National Statistics Office. http://web0.psa.gov.ph/ (accessed January 2015).

Pasadilla, Gloria O. "Social Security and Labor Migration in ASEAN." ADB Institure Research Policy ,

November 2011.

Sarah Huelser, Adam Heal. "Moving Freely? Labour Mobility in ASEAN." Asia-Pacific Research and

Training Network on Trade, June 2014, Brief No. 40 ed.

UN Comtrade . unstats.un.org (accessed January 2015).

United Nations Conference on Trade and Development . unctad.org/en/pages/Statistics.aspx (accessed

January 2015).

World Integrated Trade Solutions. http://wits.worldbank.org/ (accessed January 2015).

Heymann, Jody and Kristen McNeil. 2013. Changing Children’s Chances: New Findings on Child Policy

Worldwide. Los Angeles: University of California, Los Angeles (UCLA). (pp.2-27)

Women and Gender Institute [WAGI]. 2012. “National Situationer of Girl Children in the Philippines.”

Quezon City: WAGI, Miriam College.

National Statistics Office. (2012). 2011 Survey on Children

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