PH urged to cut dependence on exports to West
The International Monetary Fund believes that the Philippines and its neighbors should look for additional sources of growth in their own territories and further reduce dependence on exports to the United States and the eurozone as economic woes in the West may take a few more years to resolve.
Naoyuki Shinohara, deputy managing director of the IMF, said in an interview with the Inquirer that although efforts have been made recently to decrease dependence on exports to the West, there is room to reduce the reliance some more.
“Countries [in Asia] are still dependent on exports to the eurozone and the United States to a significant extent. It is important to increase intra-regional trade and to strengthen domestic demand,” Shinohara said last week at the sidelines of the annual meetings of the Asian Development Bank.
In the case of the Philippines, exports to the United States account for about 15 percent of its export revenues, while those to the eurozone account for about 14 percent.
He said plans of Asian countries to strengthen their economic cooperation, which was highlighted during the ADB meeting, was a move in the right direction. The IMF official said such plans should be implemented so that the emerging countries in Asia, which is currently the driver of global economic growth, will be able to minimize the adverse effects of the prolonged debt crisis in Europe and the still sluggish growth of the US.
Shinohara said if Asian countries strengthen their own economies by boosting demand within their jurisdictions, they could actually help address problems in the West. In particular, if demand in Asian countries is strong, their purchase of imported goods from the West may increase, thereby helping speed up global recovery process.
Selected Asian countries have pledged to strengthen their economic cooperation during the ADB meeting. Members of the Association of Southeast Asian Nations (Asean), for instance, reiterated their commitment to pursue closer economic integration by 2015.
Under the integration plan, tariffs on goods will be brought down to zero or near zero, and the regulation for cross-border investments and employment will be eased.
Shinohara said that besides strengthening ties with neighbors, Asian countries must also develop sources of growth within their respective economies.
To do so, governments must continue efforts at improving tax collection so that there will be more resources for pump-priming initiatives. He also cited the need to improve governance and the regulatory environment so that more investments will come in, thereby generating growth within the domestic economy.
“It is important to improve investor confidence and to increase the tax base. [The IMF is] glad about the commitment of the Philippine government to maintain fiscal discipline,” Shinohara said.
There is a consensus among economists that the eurozone may enter into a mild recession this year as mounting debts of governments in the region force them to cut down on spending.
