ADB urges better competition policies

The Asian Development Bank (ADB) is working with the Philippine government to improve competition policies with insights from China’s experience in the manufacturing sector to help boost Filipinos’ incomes.

ADB chief economist Albert Park said the multinational institution is developing a program on competition policies with National Economic and Development Authority Secretary Arsenio Balisacan.

“Competition policies have to be much broader to include trade, industrial and regulatory policies,” he said in a recent forum with the Philippine Institute for Development Studies.

With better competition policies, Park said the country can create more innovative goods and services which can be massively exported for higher workers’ incomes.

Competition lack hurting China’s productivity growth

“The periods in the 80s and 90s in China saw rapid growth of firms which absorbed millions of laborers from the countryside. But recent data showed the lack of real competition is hurting China’s productivity growth, now below the global average,” he shared.

ADB data shows that the Philippines has a high concentration ratio on competition at nearly 30 percent, indicating zero to low competition among industry players.

On the other hand, the United States posts less than 10 percent which conveys a much higher number of industry players. Meanwhile, China has less than 20 percent.

Park said among the major barriers to innovation in the Philippines and now in China are firms led by families that are “politically powerful.”

Give no money to losers

“We have a thinking that we should not give money to the losers. But industrial policies should be complementary to competition policies, and customized public services should address shortcomings in the business environment,” he said.

Apart from the political influence of some firms, Park said the government must support efforts of more individuals and enterprises nationwide in developing innovations, especially in the manufacturing sector, through funding programs and connecting with multiple countries around the world.

He said the Philippines must maximize the latter strategy despite geopolitical tensions with China over their territorial dispute in the West Philippine Sea and, recently, espionage allegations against Chinese businesspeople.

“Globalization drives technology transfer and incomes rise faster. Despite all these narratives here, developing countries in Asia still need to remain committed to open trade and investments,” Park said.

To speed up technology transfer to Filipino businesses of all sizes, the economist said the Philippines should streamline efforts between domestic and foreign government agencies on finance, skills development, and intellectual property rights.

By opening up their countries to several foreign firms sooner in the 1960s, Park said China expanded its labor force in the manufacturing to 30 percent of total workforce in 2018 from 10 percent in 1990.

Meanwhile, developing countries in Southeast Asia generally employed around 10 percent in manufacturing which remained relatively stagnant until 2018.