Phl should diversify economic engagements

The continuing geopolitical turmoil stemming from US President Donald Trump’s tariff restructuring and its conflict with Iran — aggravated by the Philippines’ strained relationship with China over geopolitical issues — has put the Philippine economy and  the Filipino  business community perilously navigating the currents that threaten to upend the local economy and leave it further behind in attaining economic prosperity compared with its 10 Association of Southeast Asian Nations neighbors.

As it is right now, the Philippines is already lagging behind the original five founding ASEAN member countries in terms of growth — with Malaysia, Thailand, Indonesia and Vietnam all posting much higher GDP (gross domestic product) numbers.

According to an ASEAN GDP per capita ranking  for this year, the projected GDP per capita ranking of ASEAN countries in 2026 based on IMF forecasts is that  Singapore continues to lead the region by a wide margin, followed by Brunei and Malaysia. Thailand is ranked fourth, followed by  emerging economies such as Indonesia, Vietnam and the Philippines. The four bottom dwellers are Cambodia, Laos, Timor Leste and Myanmar.

A closer look at the economic factors that are fueling the growth of our ASEAN neighbors shows their ability to diversify their economic ties and avoid territorial conflicts. In particular, Vietnam shares a border with China — and in the past has had clashes with the Asian Tiger over territorial claims to the Spratly Islands.

However, Vietnam has chosen to pursue its economic growth and prosperity for now, and has instead engaged in mutual economic benefit with China that has allowed Vietnam to post an 8.1 percent growth for the first half of this year.

As for the Philippines, we eked out a 2.3 percent growth as the Marcos administration has taken a more partisan side toward the US which has waged, under President Trump, a tariff war against its traditional allies — even with its own backyard neighbor Canada, which has now officially declared a trade “war” with the US following a breakdown in trade talks.

In fact, we were recently blindsided when the US imposed a new 12.5 percent tariff on exports to the US based on what the US government claims are “forced-labor” imports.

Huh? As far as I know, Filipino workers are quite vocal, militant even, about their working conditions. Thus, “forced labor” conditions are hard to believe. Filipino labor unions have been relatively successful in negotiating higher wages, perhaps not to the level they want. Currently, the labor sector has been wrangling with the government over an additional P85 wage hike, perhaps allowing the US to justify its additional 12.5 percent tariff imposition.

Dang@! We walked right into that!

Even at the recent HSBC summit held last week at the Shangri-La The Fort at the Bonifacio Global City, Frederic Neumann, chief economist of the bank, acknowledged that the Philippines has a strong economic partnership with the US because of historical reasons. According to Neumann, “I would just say that there needs to be an ongoing push to diversify economic engagement. So Europe should be a big partner. Australia, New Zealand, Japan and China, to the extent we can, as well as India, Africa, right? What we’ve seen very clearly across Asia and the world is the US has kind of pulled back from its engagement with trade, countries — and the rest of the world have started to negotiate more free trade agreements with each other.

In fact, the number of global free trade agreements being negotiated right now has jumped in the past 12 months. And we see Vietnam, for example, is very active in doing that. India has now come on stream and has started to negotiate with various countries... having previously been more reluctant.”

He expressed the view that “What would be helpful in this regard... yes, the relationship with the US is a strength, but I would look at it in terms of, where can we diversify? Korea is an important partner. Japan is an important partner, right? So every little bit helps, and the more we can play in terms of trade relations with other countries, the more helpful it is. So diversification, this global environment is key, I think, for stability.”

Neumann admitted that, “It is a very difficult global economic environment at the moment. We’ve seen extraordinary volatility and energy prices and commodity prices, and it’s clear that the Philippines is affected by this. We’ve seen, you know, the household struggle with higher living costs. We see import costs going up in the Philippines, but the Philippines isn’t the only economy that struggles with that.”

Former banker Antonio Moncupa, in a separate interview, framed the Philippine-China situation more succinctly — “You know you need the US, you know you need China. So, the game is how to navigate without antagonizing any. How come we always choose? There’s no need to choose. You can be our friends.”

His advice, “We can do it without choosing. In the Duterte time we chose China, Now, we choose the US, Why? Just  look at what Malaysia, Indonesia, Thailand, India, Vietnam are doing. That’s the answer.”

Moncupa points out that there is no need to escalate our territorial dispute with China. He points out, “We’re the most partisan nation. Are we supposed to be proud of that? I don’t know. Maybe some people are, but I’m not sure.”

He likewise noted that we do not have the capability to wage war — “That’s why,  you don’t confront. You do not, because you have to be realistic. Just like many of our neighbors are realistic. You do not do what you cannot stand on and support. You have to be careful.”