1. Comments on Trade, Inclusive Growth and Inclusive Policy Making by P. S. Intal, Jr. Josef T. Yap Philippine Institute for Development Studies (PIDS) 9 December 2008

2. Record of Trade Liberalization

3. Development Has Lagged

4. Poverty Record is Disappointing Poverty and Inequality in East Asia Population in Poverty (in percent) 2002-07 Proportion of Population Below $1 (PPP) a Day (%) 2002-06 Gini Coefficient China2.5010.800.47 Indonesia16.707.700.34 Malaysia5.100.000.40 Philippines30.0013.200.44 Thailand9.800.000.42 Viet Nam19.508.400.37 Source: Asian Development Bank Key Indicators, 2007

5. Why Has Trade Liberalization Failed in Many Aspects? EXCHANGE RATE POLICY NOT SUPPORTIVE Rodrik, D. (2008): “The Real Exchange Rate and Economic Growth”. Downloaded from http://ksghome.harvard.edu/~drodrik/R ER%20and%20growth.pdf (October).

6. Why Has Trade Liberalization Failed in Many Aspects? Lack of a Strategic and Coherent Industrial Policy Memiş, E. and M. F. Montes (2008): “Who’s Afraid of Industrial Policy?” Discussion Paper, Asia Pacific Trade and Investment Initiative, UNDP Regional Centre in Colombo (May).

7. Why Has Trade Liberalization Failed in Many Aspects? Poor physical infrastructure  Roots in the country’s external debt policy and weak tax effort Weak institutions and poor governance

8. Why Has Trade Liberalization Not Been Inclusive? Spotty record in improving human capital Lack of Safety Nets Labor market institutions, industrial relations

9. WHAT CAN BE DONE?

10. Main recommendation: Inclusive Policy Making “An approach to ensuring that policies and strategies take into clear consideration the impact of such policies on disadvantaged groups, operationalize social integration of previously marginalized groups, and to enhance citizen participation in governance” Q: Isn’t this DEMOCRACY?

11. Main recommendation: Inclusive Policy Making Q: Why haven’t democratic institutions worked in the Philippines? Q: Why are institutions weak? Q: How does one strengthen institutions?

12. INDUSTRIAL POLICY Review our tariff rates vis-à-vis WTO bound rates Mining-Manufacturing Link Competitiveness of Firms

13. ASEAN’s COMPETITIVENESS GOAL Transform their economies from mass production-based ones relying on unskilled or semiskilled labor to knowledge-based ones. Knowledge- based economic activities comprise R&D, product and service design, high value-added skills processing and marketing for the domestic, regional and global market places (Ariff 2003 as cited by Yamazawa and Hiratsuka, 2003)

14. Strategic Industrial Policy: Main Areas Human Resource Development Technological Capability and Skill Development Physical Infrastructure

15. Enhancing Technological Capability through Regional Cooperation and Integration Fostering local firms/entrepreneurs: e.g. Local Industries Upgrading Program; New age economic agreements, e.g. JPEPA Focus on SMEs

16. Main Elements of Fragmentation and Agglomeration

17.  Emphasis should be at the sub- national level  Involve local governments  Islands of excellence should lead the way

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