There has been a lot of talk recently about Duterte’s pivot towards Asia and away from the United States. This is one of the most recent divisive issue in Philippine politics where the country is divided between those who believe the President is making a huge mistake and those who say he is making a bold and strategic move.
In this post, I will outline my position that Duterte’s foreign policy focus in Asia is the correct and prudent move for the President. I will support this position by looking at the following: the importance of Asia in the world economy, the leverage Duterte has in the region given the political tension between China and the US, and the shape of US foreign policy after the US election.
Asia’s growing importance in the World Economy.
According to the World Bank, 3 of the top 10 countries in terms of Nominal GDP are from Asia (China, Japan and India). The United States is still at the top when looking at GDP numbers in nominal value. The Philippines is ranked 39 in nominal GDP.
When we look at the GDP rankings based on GDP in Purchasing Power Parity, the rankings change dramatically. According to the World Bank, measuring GDP in PPP gives us a better picture of the overall value of a country’s output because it eliminates the impact of differences and changes in relative price levels across economies. When we look at the ranking below, 4 of the top 10 countries are from Asia (China, India, Japan and Indonesia). Using this measure, China outranks the United States. The Philippines is ranked 27 in GDP_PPP.
When we look at the growth of Household Final Consumption Expenditure (HFCE) by region, we see that South Asia and East Asia & Pacific have seen the highest total and per capita growth rate during the period of 2000-2014. HFCE is often used as an indicator of how big the consumer market is for a particular economy. The higher the HFCE, the better the market is because the consumer base is bigger (consuming more). The fast growth in HFCE for the Asia-Pacific region makes it very attractive for investors and exporters. What makes this growth in HFCE even more important is the fact that Asia is home to more than half of the world’s population.
Recently we are also seeing a rise in the number of Billionaires coming from the Asia-Pacific region as seen from this Forbes report. This sharp rise in the number or Billionaires in the Asia-Pacific region shows how vibrant the investment climate is in Asia which has also stirred a strong wave of entrepreneurship in the region. According to some estimates, the amount of Venture Capital investments made in Asia double in 2015 ($55 B) compared to 2014 ($20 B).
This amount of economic activity and potential in the Asia-Pacific region is key for the Philippines if it wants to continue the robust economic growth it has achieved in the last few years. The entire world is looking at Asia for growth in investment and trade, the Philippines being inside the region has a unique advantage. The key should be to ensure that our economy is more deeply integrated in the Asia-Pacific region. If the growth and potential for growth in the Asia-Pacific region is not reason enough for you, then just look at the state of the US and European economies. Yes they are still the largest but these countries are in shambles. The US is still struggling from a weak recovery and the EU is in the brink of breaking apart. The political instability in the US and EU exacerbates the uncertainty of any robust and meaningful growth coming from these regions. For the Philippines to wait for the west to figure things out and get left behind by the Asia train is suicidal and stupid.
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