Capital liberalization and stockmarket growth in Asia

The ADB released its “Key Indicators for Asia and the Pacific 2016” report nearly two weeks ago. I found these data interesting. These tables are cropped, I removed other countries and years to focus on these important economies in the region.

This is a good summary why the PH and TH, CN, JP and NZ, were among the best performing economies in stock market until last year.

Another group of economies have maintained their high levels of stocks capitalization but in terms of growth and % share of GDP, they performed badly: SK, TW, ID, MY, SG and AU.


In terms of growth rates, overall there was fast recovery in 2010 for many economies after the global financial turmoil of 2008-09, then they tanked somehow. The PH and TH stocks’ double-digit growth however, were sustained until 2013.


On interest rates, PH T-bill rates declined significantly, from almost 10% in 2000 to only 1.7% in 2015. Lending rates were also down, only 5+% for many economies.


These data show that capital liberalization pays off. Even in period of global financial squeezes, it is not wise for governments and central bankers to resort to capital controls because this will further squeeze and scare those investments that are still in the economy or planning to enter the economy. Capital dips and recoveries, investments up and down, are 100% part of the DNA of capital. Allow and protect, respect them. Soon they will come and stay for the long haul.


The role of liberal reforms and big population in growth momentum

* This is my article in BusinessWorld last October 27, 2016.


Several issues preoccupy President Rodrigo Duterte’s mind and mouth: the violent anti-drug campaign and murders, his anti-US, anti-EU, and anti-UN expletives and polemics (but later reversing his earlier attacks against these countries and/or multilateral bodies).

After his anti-Obama, anti-US tantrums before and during the ASEAN and related summit meetings, he repeated the same vitriol in his China visit last week, citing his “separation from the US” and that the Philippines is united with China and Russia against the world. As expected, he took back these assertions almost immediately, clarifying that the country cannot afford to be separated from the US the minute he arrived in Manila.

Spouting off these incendiary remarks then taking them back — characterized as “sugod-atras” in Filipino — should not be taken literally as advised by the President’s cabinet officials.

However, these unnecessary assertions have real, negative impact on business confidence in the country, especially for massive investment plans and pledges that remain on the “wait and see” mode since the campaign period (February 2016) until today.

Will these outbursts by the President ultimately derail the economic momentum of the Philippines as started by the previous Aquino administration?

The Economist magazine regularly pools some of the world’s biggest investment banks and ratings companies about their global economic forecast and GDP growth projections. The numbers are shown on the table.

This piece made these country groupings in re-constructing the table. Group A are traditional, developed economy allies of the Philippines; B are President Duterte’s “pivot new friends”; C are the major Asian friends and trade partners; and D are miscellaneous. Venezuela is included in D to show how socialism and heavy statism can lead to economic and business decline (see table).


These numbers show us the following:

One, group A remains to have sclerotic growth, they seem to be very lucky to grow 2% or higher. Unemployment rate is high, 5% and up, except Japan. Not shown on this table are the four EU countries which have incurred double-digit unemployment rates in July or August 2016: France 10.5%, Italy 11.4%, Spain 19.5%, and Greece 23.2%.

These figures show that the developed countries cannot be expected to provide more impetus to lead and drive faster global growth. Their capacity to provide more foreign aid, more loans and grants, is also compromised.

Group B has mixed results. China can be expected to lead regional growth and help pull upwards global demand, but not Russia. The latter remains limping due to low global oil prices, petroleum being one of its major export products, among the important factors.

Groups C and D continue to show fast growth potentials except the developed Asians like South Korea, Taiwan, Hong Kong, Singapore, and socialist Venezuela. The Philippines is expected to retain fast growth, third highest after India and China this year, also third highest next year after India and Vietnam, among emerging and developed Asians.

An important ingredient for faster growth is high and young population. Notice above that countries with 90+ million people — Vietnam, Philippines, Indonesia, Pakistan, India and China — are growing fast. The US, Japan, and Russia should belong to this category but they are growing slow, partly because they have an old and aging population.

Going back to our earlier question, will President Duterte’s emotional outbursts ultimately derail the Philippines’ economic momentum?

The answer seems to be no for two important reasons.

One, growth momentum is retained as various macroeconomic and infrastructure reforms laid by the previous administration are bearing fruit.

Two, our high and young population of 103 million people as of 2016 has become a potent force to provide the necessary market demand and labor force supply for more investments and entrepreneurial advancement.

So, despite the President’s incendiary remarks plus thousands of murders in the anti-drugs campaign that can potentially disappoint if not threaten big foreign investments planning to come to the Philippines, growth momentum is well in place.

Moreover, if this economic momentum is coupled with presidential sobriety and an anti-drugs campaign that is guided by due process, the country’s growth rate of 7%, or perhaps even higher, is very much possible.

Myanmar is back to civilian government

While Thailand moved from civilian to military government, Myanmar moved from military (for more than half century) to civilian government. Congrats Myanmar people.

A friend suggested that Myanmar will be back to military dictatorship in 6 months and noted that Su Kyi refuses to acknowledge the persecuted Rohingya crisis.

Being a “rational optimist”, I believe that if ever Myanmar will go back to a military dictatorship, it will be a 2 steps forward, 1 step backward, and hence, the civilian government — with all its warts and imperfections — will prevail. Meanwhile, it is true that Su Kyi is silent on the Rohingya issue. Now that her buddy is in power, let us see how they will deal with this issue.

There should be some credit to the ASEAN efforts at promoting human rights. Myanmar’s generals and dictators dislike human rights protection. But being with the ASEAN for many years and seeing other countries in the region that are under civilian leadership and things are fine, no frequent riots or demonstrations when there is civilian supremacy over the military, the military softened and allowed elections and they were defeated.

Compare the state of human rights respect or violation, South East Asia vs South Asia or Middle East or Africa or S. America, SE Asia is better. Here in the PH for instance, things are not exactly heavenly but freedom of speech is more protected, almost anyone can curse the President or legislators or the Supreme Court, etc. without going to jail.

There are still remnants of the military dictatorship, but there are changes. From nearly 100% to 25% military presence in the Parliament, that is still an improvement.

“A key challenge for Suu Kyi’s administration will be maintaining smooth relations with a military that locked her and many of her colleagues up for years.

The charter ring fences a quarter of parliamentary seats to unelected soldiers and gives the army chief control over the home affairs, border and defense ministries — and with it sweeping powers over the civil service.…/suu-kyi-aide-htin-kyaw-sworn


A good and brief timeline. The military dictatorship was in power from 1962-2015, 53 years.…/new-dawn-for-myanmar–timeline
Meanwhile,  here’s one proof of economic liberalization in Myanmar, coinciding with political liberalization that allowed elections. Myanmar made the biggest reduction in total tax rate among the 10 ASEAN countries, from the PWC “Paying Taxes 2016” report, in just one year. There is momentum in economic and political liberalization in that country.

From my article in BusinessWorld today.

Finally, I believe that the Thai military dictatorship won’t last long. They should be gone from power within two years or less.

Workshop on Trade Liberalization at the APF 2015, Kuala Lumpur

Last week, April 23, I was one of three speakers in a workshop on trade and investment liberalization in the ASEAN organized by the Institute for Democracy and Economic Affairs (IDEAS) and South East Asia Network for Development (SEANET), during the ASEAN People’s Forum (APF) 2015, in Kuala Lumpur, Malaysia.

The two other speakers were Prof. Cris Lingle of Universidad Francisco Marroquin (Guatemala) and Center for Civil Society (CCS, India), and Datuk Ravindran Palaniappan of Malaysia’s Ministry of Trade and Industry (MITI). Photo below from left: Cris, me, Datuk Ravindran, and Wan Saiful Wan Jan, IDEAS CEO, who moderated the event.


apf0A speaker from Thailand failed to come. But Cris is an articulate speaker,also Datuk.

Datuk’s speech was covered by the Malaysian Star, in its news report the next day, No discrimination against domestic investors in Asean,says Miti

My presentation was entitled, “Unilateral Trade Liberalization: Benefits to ASEAN People“. Unilateralism is defined as

* “Going alone”, no need for reciprocity in reduction of tariff and other trade barriers (Richardson, 2001).

* Two types of unilateralism: (1) sectoral or few products, and (2) multi-products. Examples of (1) was the UK corn laws removal (1846); Ex. of (2) are APEC Individual Action Plans (IAPs).

Famous economist from Columbia U., Jagdish Bhagwati has this beautiful advice:

if we refuse to reduce our trade barriers just because others do not reduce theirs, we lose from our trading partners’ failure to reduce their trade barriers and then we lose twice over from our failure to reduce our own.

Then I showed these 5 cases of unilateralism, starting with HK, the perennial “freest economy in the planet” yearly by the Fraser Institute’s Economic Freedom of the World (EFW) and Heritage Foundation’s Economic Freedom Index (EFI).

Our neighbor in the ASEAN also took this trade policy since about two decades ago and the results have been good.


Then the cases of NZ and Chile. I wanted to discuss also the case of UAE and Dubai, but I lacked time to do more research that day.

Below, light green line, CLMV means Cambodia, Laos, Myanmar, Vietnam. The red line is for the ASEAN 6, namely Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand. The middle, orange line is for the whole ASEAN 10 countries.


Then I discussed the Gravity Model of Trade  in analyzing and quantifying the contribution of unilateralism of four ASEAN countries, Indonesia, Malaysia, Philippines and Thailand, to their export performance and share of GDP. I will discuss and write it in another blog post. Four UPSE students, members of my undergrad organization then, UP ETC, prepared the econometric modelling and regression analysis.

The open forum was fast and dynamic, as there were NGO leaders from Malaysia, PH, Vietnam, etc. who are not comfortable with free trade, much more with unilateralism in trade liberalization. Cris and Datuk were great in answering the questions.

Several points were raised by a participant from the Philippines, Dr. Nymia Pimentel Simbulan of PAHRA and PhilRights. She said that while economic liberalization may be good, the way it is implemented by many governments result in more poverty. Examples are (1) dumping of cheap agricultural products in the Philippines, resulting in the displacement of many Filipino farmers, Another is (2) mining where big foreign minilng companies that occupy huge tracts of land just destroy the land and rivers and they leave later with their huge profits.

I answered that in concern #1, people generally change. So while the grandfather was a rice farmer, the father is also a rice farmer, the son should also be a rice farmer, and so on. One can move from rice farming become a vegetable farmer, chicken and poultry farmer, tilapia farmer, and so on, On #2, it is not true that big mining companies also mine huge areas of the country. I think their total mining concession areas could be no more than 0.01 percent of the country’s total land area. Besides, if a company has a 2,000 hectares concession area, it does not mine all of it, normally they would mine only 50 or 100 hectares and when it’s mined out, it is covered with new soil and reforested. Then start mining the next area.

There was also a question from the audience about the impact of strict intellectual property rights (IPR) protection in pharmaceutical products under the proposed TPP Agreement where Malaysia will become a member; threats to AIDS and other patients  Wan asked me to answer that question. I said that IPRs like patents apply only to newly-invented medicines. Though patent life is 20 years, the commercial  period is only about 8-10 years as the first 10-12 years would be consumed by the various clinical trials (first with animals, then with moderately sick people, then with seriously ill patients, and so on, involving thousands of people from different countries) and regulatory approval processes.

Besides, in  the  WHO Essential Medicines List (EML), I think about 99 percent of them are off-patent drugs and vaccines, meaning there are no IPR issues and these are useful, disease-killing medicines too, at lower prices. IPR in newly-invented medicines should be respected and protected, otherwise innovator companies will have little incentives to produce and invent new, more revolutionary medicines that can  tackle new and  evolving diseases.

Above group photo from left: Wan, me, Minh Nguyen, Cris, Datuk. Minh is from Hanoi, Vietnam, and he is the editor of, a new think tank and translator-publisher of some important classical liberal books and papers into Vietnamese.

Thanks again to IDEAS and SEANET for that great forum.

Indigenous Rights, Labor and Human Rights in the ASEAN

Tomorrow, the ASEAN People’s Forum (APF) will start in Kuala Lumpur, Malaysia. It is a gathering of largely anti-liberalization, anti-privatization and deregulation groups and NGOs. The 3-days event (April 22-24) is held before the annual ASEAN Summit will officially start, April 25-27, also in KL.

The APF Secretariat is sending teasers to registered participants about selected panels by email. Here are four of those teasers.

(1) On indigenous lands. This panel is an attack on state and corporations “collusion”. The term “non-state” should actually and technically include not  only private corporations but also NGOs, people’s organizations (POs), church groups, rebel groups and other CSOs as they are all “non-government” entities.

Land grabbing and stealing is a crime, and it does not matter if the land grabber is a local or foreign corporation or individuals, rich or poor. The main function of the state is to enforce the rule  of law, especially the law against stealing and disrespect of private property rights, and law against right to life and liberty of the people. This concern can be tackled anytime anywhere and not an ASEAN-specific issue.

(2) Forum on “right to work” and “rights of workers”. These are fine. But it seems that the advocacy has stopped there. What about the “right not to hire”, “right to fire” of lazy or dishonest or inefficient job applicants and/or workers? What about the “rights of entrepreneurs”?


Technically, “right to work” is an individual  decision. There are many individuals who do not want to work even if a job opening is available to them; or do not want to stay to jobs they already hold. The same way, a “right to entrepreneurship” or “right to create jobs for others” is also an individual  decision. Entrepreneurs can choose to hire only two workers instead of five or 10, and give those hired high pay, lots of gadgets and machines, training and seminars, to improve their productivity so they can do the work of 5 or 10 people.

(3) ‘Extraterritorial obligations in the context of cross-border investment in ASEAN: the role of human rights institutions’

Date: Friday, 24 April 2015, 1.30 – 3.30pm

“The ASEAN Economic Community is likely to produce an escalation in cross-border investments within ASEAN, which brings with it significant human rights and environmental challenges. The workshop will examine recent transboundary human rights complaints to the Thai and Malaysian National Human Rights Institutions regarding cross-border investment by Thai and Malaysian companies in Laos, Cambodia and Myanmar. The discussion will highlight the role of national and regional human rights institutions in holding states and companies accountable for the results of their investments. It will also address the accountability and rule of law challenges that enable such human rights violations to occur and experience to date in investigating and remediating human rights complaints.”


       – Dr. Nirun Phitakwatchara, Commissioner,

          National Human Rights Commission of Thailand (NHRCT)

     – Professor Dato’ Dr. Aishah Bidin, Commissioner,

          National Human Rights Commission of Malaysia (SUHAKAM)

       – Dr. Seree Nonthasoot, Representative of Thailand to

           the ASEAN Intergovernmental Commission on Human Rights (AICHR)

       – Mr. Eang Vuthy, Executive Director,

          Equitable Cambodia (Cambodia)

      – Mr. Ye Lin Myint,

           Dawei Development Association (Myanmar)

      – Ms. Sor. Rattanamanee Polkla, Coordinator,

           Community Resource Centre, (Thailand)

Facilitators: Earth Rights International (ERI) and Towards Ecological Recovery and Regional Alliance (TERRA)

Organised by:

Community Resource Centre (Thailand), Suaram (Malaysia), 

Equitable Cambodia (Cambodia), Towards Ecological Recovery and Regional Alliance (TERRA)

I cannot attend this forum because I  will be flying back to Manila morning of that day. But similar to my comments in #1 above, human rights (HR) is a fundamental issue as it affects the right to life, right to private property ownership of the people. It does not matter if the HR violator is a local or foreign company or individual.

Now if the organizers and speakers of that panel would argue that AEC and intra-ASEAN investment liberalization is to blame, they are mistaken. With or without the AEC, or any other regional or multilateral economic agreements, the people’s basic HRs should be promulgated and violators, local or foreign, government or private personnel, should be made accountable.

The AEC is about greater economic integration of the 10 member-states of the association. It is both integration and competition at the same time, the same way that neighboring cities in the same country can be competing in attracting investors and visitors. And  it is a good thing because it encourages, even forces people and officials, to become more efficient, more industrious and ambitious, more transparent and accountable, to their stakeholders and customers.

It is unfortunate that a number of NGOs and CSOs fall for the populist belief that accelerated economic liberalization, greater economic integration and competition within the ASEAN, can be a bad thing.

The new regional center and think tank South East Asia Network for Development (SEANET) would endeavor to help clarify these issues through more public education, citizens and civil society engagement. More choices and options, more freedom whom to buy from and sell to, ultimately redounds to economic empowerment and hence, poverty alleviation in the ASEAN countries and the rest of the world.