Mobility of goods, capital, and people in Asia

* This is my article in BusinessWorld last Tuesday.

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One big issue that failed to land on front pages during the ASEAN Prosperity Summit last week is the creeping protectionism, not through rising tariffs but rising non-tariff barriers (NTBs).

Malaysian Prime Minister Najib Razak pointed out during the Summit that NTBs and non-tariff measures (NTMs) from 2000 to 2015 have surged by nearly four times to 5,975 from 1,634. This despite the zero tariff regime for intra-regional trade and the creation of the ASEAN Economic Community (AEC) or the regional single market.

While ASEAN was created initially for defense cooperation against regional communist revolutions in the ’60s and ’70s, it has evolved into a platform for freer movement of goods, people and services, and capital or investment. It was a good development and it should be pursued.

This coming November, the Philippines will host the ASEAN partners’ meeting composed of ASEAN + 6 (China, Japan, South Korea, India, Australia, and New Zealand) + Russia and US. Mr. Putin, Mr. Xi, and Mr. Trump and other leaders will be coming to Manila.

The US exit from the Trans Pacific Partnership Agreement (TPPA) and China-Japan leadership in the Regional Comprehensive Economic Partnership (RCEP) are important developments.

By how much have Asian economies improved based on freer mobility of goods, services, investments, and tourism? Here are some basic data (see table).

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Those that have expanded by more than seven times in just 15 years are the following:

  1. Vietnam: 11.2x in exports, 10.6x in imports, 9.1x in investments, and 10.6x in tourism receipts.
  2. Myanmar: 7.2x in imports, 12.1x in investments, 12.9x in tourist arrivals; also high expansion in tourism receipts.
  3. Cambodia: 14.2x in investments, 10.3x in tourist arrivals, and 24x in tourism receipts.
  4. Laos: 9.3x in imports, 10.4x in tourist arrivals and 36x in tourism receipts.
  5. China: 9x in exports, 7.5x in imports, almost 6x in investments, and 7 to 7.5x in tourist arrivals and receipts.
  6. Japan: 7.4x expansion in international tourist arrivals.
  7. India: 7.5x in exports, 12.3% in imports, and 7.8x in exports.

The Philippines also experienced modest growth in all the above indicators but not fast enough to create more jobs and businesses to its 104 million people. We should take hard lessons from our two small neighbors with huge economic achievements, Singapore and Hong Kong.

Singapore with only 5+ million people and just 3 1/2 hours by plane south of Manila, has 6x more exports, 11x more FDIs, attracts more than 3x foreign tourists and more than 4x in tourism receipts than the Philippines.

Hong Kong with only 7+ million people and less than 2 hours by plane north of Manila, has 8x more exports, 32x more FDIs, attracts nearly 7x foreign tourists, and nearly 8x in tourism revenues.

What small economies Singapore and Hong Kong have that the Philippines lacks are two important policies: free trade (zero tariff, minimal NTBs) and stricter rule of law (the law applies equally to both rulers and ruled, applies equally to unequal people).

So while we have improved our GDP size and material wealth via freer trade, freer movement of people and capital, we need to free up more.

We should allow more islands and provinces to have their own industrial zones to attract more investments and foreign trade. To have their own international airports and seaports to attract more investments and more tourism.

More modern infrastructure, simpler rules, and freer trade will help the Philippines attain what our developed neighbors have already achieved. Drastic reduction in NTBs and the removal of rice quantitative restriction (QR) and protectionism for instance. And less politics, taxes and bureaucracies, more respect for the law by politicians and bureaucrats.

Bienvenido Oplas, Jr. heads Minimal Government Thinkers and a Fellow of SEANET. Both institutes are members of the Economic Freedom Network (EFN) Asia.

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Asian tourism and NAIA

* This is my article in BusinessWorld last December 03, 2015.

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Tourism provides income and creates jobs for many economies in the world. Singapore, for instance, attracts foreign visitors two times its population size while Hong Kong gets visitors four times the number of its residents.

The Philippines, being detached from the Asian mainland and an archipelago, does not get enough foreign visitors compared to its neighbors in the region. Thus, while one can take land transportation from Thailand to Cambodia, Laos, and Vietnam, or from Malaysia to Singapore, it cannot be done in the Philippines. One needs to fly from Manila to other exotic islands and famous beach resorts like Boracay, Bohol, Cebu, Palawan, Davao and so on.

Nonetheless, there is consistent growth in the Philippine tourism industry, attracting nearly 5 million foreign visitors in 2014. (See Table 1)

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In terms of spending by foreign visitors and returning Filipinos already based abroad, the Philippines received nearly $4.8 billion in 2014. It is not as big as what Malaysia, Thailand, Singapore and other neighbors receive but it is twice what the country earned a decade ago. (See Table 2)

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Since we aim to attract more foreign visitors and guests, it is important that infrastructure and logistical support are simple and provide convenience to our visitors and returning Filipinos, especially frequent travellers.

The airport transfer at the Ninoy Aquino International Airport (NAIA) to different destinations is generally very inconvenient and time consuming, especially with the on-going construction of skyways near and around the four terminals.

Take the case of VJ, a Filipino expat for most of his professional life who has been living in Singapore for three years now. His work takes him to the entire Southeast Asian region, traveling at least 25% of his time. He can fill one passport with stamps in an average of 1.5-2 years.

VJ flies from Singapore to Manila once or twice a month, both for work and personal travel. At NAIA, he would normally take the yellow airport taxi, whose rate is higher than regular taxis. Despite forking out extra for the same service, VJ prefers the yellow cabs since the cars are in better shape and the drivers are more professional.

Recently, the queue for the yellow cab has been longer than usual, taking passengers one and a half hours before they get a ride.

Another option is to take the “Bayan ko” flat rate white cabs. They cost more but at least the queue is more manageable, that is, if cars are around. Typically, a trip from NAIA3 to Ortigas for a yellow cab is around P275 and around double that amount for the white, flat rate taxi.

With the frequent heavy traffic around the airport, even queueing to get white cabs takes 30-45 minutes.

Last Nov. 6 when VJ flew back home, he was ready to take the white cab but saw that the line was extended, thinking that it would take him one and a half hours to get a ride.

One lady asked him if he wanted a quick ride to Ortigas, it would cost him P1,550, triple the price of the more expensive white, flat-rate cabs.

Another lady approached him and offered a ride to the same destination for P1,250. Because he was very tired, he took the bait.

The lady took him to Bay 1 of Terminal 3 and a white sport utility vehicle hurriedly picked him up. An airport policeman or traffic enforcer later hailed the vehicle but they were let go after a quick conversation with the driver. The driver told VJ that the policeman is the father of one of the female barkers. The driver then stopped and talked to one of the barkers, telling her that he will “take care” of the enforcer later or words to that effect.

Expensive rides, bad experiences at airport transfer

VJ is familiar with all the other airports in Southeast Asia and swears that they are devoid of this kind of taxi scam. He tried Uber before with good experience but for some reason, its signal is weak in NAIA3, or they may have been blocked, or Uber cars refuse to ply NAIA3.

Among the quick and convenient airport transfer for passengers would be different aircon buses or vans that will take passengers from terminals 1-3 to Makati, Ortigas, Cubao, Manila, Alabang, and so on. Passengers can get off at major hotels or take the ordinary taxi from those business districts. This will significantly reduce the number of cars that go in and out of the airport and hence, smoothen traffic flow.

If complicated, politicized, and bureaucratic franchising system is not a factor, private players can easily field these buses or vans and give faster and cheaper transportation for the passengers. But there could be heavy politics and opposition lobbying at the Land Transport and Franchising Regulatory Board and the Manila International Airport Authority as this new scheme will adversely affect the taxi duopoly (yellow and white/flat rate) and the third, “taxidap” scheme at the airport.

If this taxi duopoly plus taxidap scheme are kept for a long time, then the Philippines will not get more foreign visitors as these horrendous experience will be factored in by the tourists. It is safe to assume that Cambodia and Myanmar will overtake the Philippines in attracting more tourists by 2016 (see Table 1 again), if not this year.

Bienvenido S. Oplas, Jr. heads Minimal Government Thinkers, Inc., and is a Fellow of the South East Asia Network for Development (SEANET).