Published Date:
14-Jun-2011
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With the country’s economic liberalization, the country’s exports and domestic economic activity expanded significantly. The expansion of new exports raised the level of the country’s demand for foreign goods as well.

By 1998 – the beginning years of this review – the domestic economy had already expanded its participation in international trade widely. The Asian financial crisis which began the year before adversely reduced international trade and this showed in the initial early years from 1998.

“Exports.” The size of Philippine exports as a percent of GDP is high. It rose from 1998 to 2010, noting that in view of the regional economic crisis of 1997, export earnings fell in 1998 relative to the previous year. Domestic and international recovery during the period resulted in the continued rise of exports as well as change in its composition. In 1998, exports was 44.3 of GDP; in 2000, 51.4 percent; and in 2010, 50.6 percent.

Throughout 1998 to 2010, total real exports increased at 6.2 percent per year. The latter period from 2003 to 2010 marked a higher rise of exports, representing recovery from the financial crisis of the earlier period. Electronics and related processing semiconductor exports still dominated the goods trade accounting for around 70 percent of total export trade in goods.

“Exports of services.” A distinctive feature of the rise in exports was the change in the composition of exports. Though exports of goods recovered, the earnings rose more sharply in the export of services. The average real growth of export of services from 1998 to 2010 was 9.1 percent per year. The export of services fell by one percent per year from 1998 to 2002. Then, the recovery, including the growth of new services exports, was strong thereafter. From 2003 to 2010, the export of services rose at 14.3 percent per year.

The export of services came from the expansion of back-office services, predominantly of call centers. The high cost of such services in highly complex industrial organizations in the US and other countries led to the international outsourcing of such services.

The international telecommunications revolution brought down the costs of international communications. This in turn encouraged the sub-contract of back-office operations to the Philippines. This was of course accompanied by a liberal framework for the entry of foreign investments in this area as well which led to the transfer of their call center facilities to countries with the comparative advantage in offering lower costs.