Kristine Joy Cruz Martin
Re-examination of the Contribution of Net Exports to GDP Growth (1960-2000)
The rapid spread in the international production networks in the 1960s paved the way to the development of a new manufacturing paradigm - global production fragmentation. In this model, a previously integrated production value chain is broken to different stages allocated to different countries depending on their comparative advantages (Hummels, Rapport and Yi, 1998). Consequently, an evolving good towards its finished form, has to travel across borders of at least two countries before reaching its final consumer.
As the Philippines participated in the internationalization of supply chain, the country’s export basket gradually transformed from being majorly agro-based in the 1960s to being led by import-dependent manufactures in the 1990s. This undoubtedly affected the value-added contribution of exports to the country’s economic growth.
Traditionally, contributions to economic growth are calculated using the Net-Export Method (NEM), which attributes Gross Domestic Product (GDP) growth to the different final demand components. However, recent researchers including Kranendonk and Verbruggen (2008) assert that NEM can be a misleading indicator since it allocates imports to exports alone; thereby overlooking the fact that imports are also used for private consumption and investment. In order to correct this measurement, the Import-Adjusted Method (IAM) is used since it re-attributes imports to all final demand components before it calculates each contribution to economic growth. As it accurately distinguishes imports used for exports, IAM can be used to show how the emergence of global production chain affected the contribution of net-exports to GDP growth.
In this light, this study aims to re-examine the changes in the contribution of Philippine net-exports to GDP growth in 1961-2000 brought about by the internationalization of supply chain. This will be done through a comparative analysis of the results generated by NEM and IAM. To execute both methodologies, the Philippine Input-Output (IO) tables in 1961, 1965, 1969, 1974, 1979, 1983, 1985, 1988, 1990, 1994 and 2000 will be used.
The following are the expected findings of the study: (a) as suggested by IAM, a decrease in the contribution of net-exports to GDP growth can be observed in the initial years of the Philippine’s participation in the new production paradigm; the Foreign Direct Investments directed toward the domestic manufacturing industry nevertheless in the last two decades helped increase the net-export’s contribution; and (b) the conclusions derived using IAM are different from that of the NEM. The former methodology reports positive net-export contribution for all years, whereas the latter has mixed signs. IAM also provides higher values than the latter and is more reflective of the global production reality and the Philippine policy stance.
The aforementioned inferences from the study can aid better policy formulation and targeting. Firstly, it is recommended that policy formulation give more weight to investment and logistics complementary to export strategies. Secondly, if the government desires to determine how to increase GDP growth, one direct route is to use the import-adjusted methodology since it is more targeted in accounting the contribution of each final demand component to growth.
KRISTINE JOY CRUZ MARTIN
32 Malasaga St. Pinagbuhatan Pasig City
Full-Time Faculty and Researcher, University of Asia and the Pacific (present)
Graduate Staff, University of Asia and the Pacific (internship) (2012-2013)
EDUCATION, HONORS AND AWARDS
UNIVERSITY OF ASIA AND THE PACIFIC
MS in Industrial Economics (2011 – 2013)
Cum Laude; 100% Merit Scholarship; Rank 10th in the Top 10 Economic Students awarded by Junior Philippine Economic Society, UP Diliman
B.A. in Humanities with Professional Certificate in Industrial Economics (2008- 2011)
GWA of 1.39; 100% Merit Scholarship; Dean’s Lister for 5 semesters
RIZAL HIGH SCHOOL
2nd honorable mention; Children’s Museum and Library, Inc.’s Model Student; Children’s Museum and Library, Inc.’s A1 Filipino Child; Vice President Noli De Castro Academic Excellence Awardee
Updating the Philippine Input-Output Table (present project)
AEC and Services Liberalization (2013)
Utilizing FTAs for MSE internationalization (2013)
Re-examining the Growth and Dynamics of Philippine Exports 1961-2000 (Masteral Thesis, 2013)
Changes in the EU GSP and Its Impact on the Philippines (2013; published on the Recent Economic Indicators 2013)
Examining the Euro-Crisis (published on the Recent Economic Indicators July 2012)
Measuring the Impact of FTAs (published on the Recent Economic Indicators February 2012)
An Analysis of the Philippine Offensive and Defensive Interests in the Non-Agricultural Sector: Inputs to the Philippine-European Union Free Trade Agreement (published on the Recent Economic Indicators November 2012)
Examining the Eurozone Crisis (published on the Recent Economic Indicators July 2012)
Fiscal Sector Analysis: An Assessment of the PPP Effectiveness in the Philippines (2012)
Trade Analysis: Market Intelligence for AGC Flat Glass Incorporated Export Product, Float Glass (2012)
APEC-GOS Symposium-Workshop on International Franchising for SMEs (June 21, 2013)
FORUM:Korea-Philippines Free Trade Agreement (FTA), (October 30, 2012)
One Country, One Voice, Philippines-EU FTA Consultations (September 20, 2012)
Year-End Economic Briefing, 2011, 2012, 2013,
Mid-Year Economic Briefing, 2011, 2012, 2013
Shell’s Sustainable Development in Youth Progress 2011 (Facilitator)
Thank you for helping us by citing the seminar when using these documents (17th Sustainable Shared Growth Seminar of the Sekiguchi Global Research Association, February 11, 2014, College of Engineering, University of the Philippines)