Top 10 trade and investment stories of 2022
Here is this column’s assessment of the important trade and investment stories of the past year, five global and five national.
1. Big recovery in global merchandise trade by nearly $4 trillion in 2021 over 2020
The World Trade Organization (WTO) in November released its flagship annual publication, the World Trade Statistical Review 2022. Global merchandise trade reached $22.3 trillion in 2021, led by China, the US, Germany, the Netherlands and Japan. Economies that experienced big expansion in exports from 2011 to 2021 were China, Hong Kong and Taiwan (2x), and Vietnam (4.8x).
2. Mild expansion in global exports by about $2.4 trillion in 2022
In the online statistics of WTO, the first three quarters of 2022 are available and the trend shows potential global merchandise exports of $24.7 trillion for the full year, or a mild expansion of $2.4 trillion over the previous year. US exports were estimated to have hit $2 trillion for the first time, special credit to its huge LNG exports to Europe. And despite extensive sanctions against Russia, its exports were projected to have reached about $550 billion in 2022 (Table 1).
3. Global foreign direct investment (FDI) inward and outward stocks doubled from 2011 to 2021
The United Nations Conference on Trade and Development (UNCTAD) in June released the World Investment Report 2022. FDI inward stock — net of inflows minus outflows through time — reached $45.4 trillion in 2021. The US remained the No. 1 destination of FDIs and was the main exporter of FDI measured in outward stocks.
4. China, Japan, South Korea and Taiwan were net exporters of capital, while India and ASEAN countries remained net importers
Japan FDI instock was only $257 billion in 2021 but its outstock was $1.983 trillion. China and Hong Kong had a combined FDI instock of $4.1 trillion in 2021, while their combined FDI outstock was $4.7 trillion (Table 2).
5. Global illicit trade was estimated at more than $2 trillion a year
The number is an UNCTAD estimate. There is a huge diversion in commerce from legal and registered products to illegal ones, leading to lower tax revenues for governments that led them to raise taxes elsewhere. In September, it held the second UNCTAD Illicit Trade Forum in Geneva, in partnership with the Transnational Alliance to Combat Illicit Trade (TRACIT). The goal was to highlight initiatives and cooperation to fight this criminal activity.
6. Philippines remained less attractive in merchandise exports and as an investment destination
The Philippines was ranked the 12th largest population in the world but only 38th in GDP size and 46th in merchandise exports. It was also far below in FDI inward stocks and tourism visitors. Our merchandise exports in 2021 hit only $64 billion, nearly a fourth of Malaysia and Thailand and nearly a fifth of Vietnam. While our geographic isolation (it can be reached only by plane or boat) is a factor, other factors include our overall poor infrastructure and low power generation.
7. High incidence of illicit trade especially in tobacco
See a recent report in BusinessWorld, “Gov’t losing P250B in revenues due to illicit trade” (Dec. 14) quoting Jesus L. Arranza, the chairman of both Fight IT (Illicit Trade) and the Federation of Philippine Industries. He estimates that cigarette smuggling alone deprives the government of P24.7 billion a year in taxes. His estimate is not far from the estimates of Albay Rep. Joey Salceda of P30 billion a year in tax revenue losses, of former Party-list Rep. Koko Nograles of P31 billion a year (P26 billion to P60 billion a year), and this column’s estimate of P36 billion to P49 billon a year (see “Inflation and Illicit trade,” Nov. 7).
8. See-saw in cement liberalization and protectionism
See these reports in BusinessWorld: “Petition to extend safeguard measures for cement rejected” (Nov. 9), “Cement industry says ‘premature’ to let safeguard measures vs imports expire” (Oct. 10), “DTI to impose anti-dumping duties on cement imports from Vietnam for 5 years” (Dec. 22). This column consistently argues for free trade. Consumers and businesses should be free to choose where to buy and get products like cement for their needs. Expensive cement and steel often leads to people cutting costs for their houses, which can be easily damaged by strong earthquakes or storms, which can lead to loss of lives and properties.
9. Higher investor confidence in the Philippines
This was reported in at least four articles in BusinessWorld last month: “Nearly 800 IT-BPM projects endorsed to BoI” (Dec. 19), “PEZA-approved investment pledges surge this year” (Dec. 21), “BoI approves P729-billion investments in 2022” (Dec. 22), “‘Keen’ European interest in shipping after foreign ownership cap removed” (Dec. 26).
10. The worst is over and the best is yet to come
That is the title and assessment of a recent statement from Finance Secretary Benjamin Diokno, also reported as “‘Better years’ ahead for PHL — Diokno” (BusinessWorld, Dec. 29). Among the reasons for his optimism which this column agrees with are: (1) the early approval of the 2023 national budget, faster rollout of important infrastructure projects, (2) adoption of the first-ever Medium-Term Fiscal Framework, FY 2023-2028 and the Philippine Development Plan 2023-2028, which unite executive and legislative fiscal and economic priorities, and (3) legislation for more economic liberalization in the Foreign Investment Act, Retail Trade Liberalization and Public Service Act.
I must add that some changes in budget priorities must be made. In the past and in the recently signed General Appropriations Act of 2023, priorities of the annual budget are not on productivity-enhancing physical infrastructure but on social sector subsidies and freebies, and an ever-rising spending and entitlement by the armed sectors including the luxurious military and uniformed personnel pension: P124.4 billion in 2021, P153.1 billion in 2022 and P176.7 billion in pension and gratuity fund in 2023 (Table 3).
Having free education from elementary to university, free healthcare, free monthly cash, free irrigation, free bus rides in Metro Manila, etc. are formula for people to be more state-dependent and not self-reliant. A bloated police and military with bloated pension funds taken not from their monthly contribution but from taxpayers is additional recipe for endless borrowings, high interest payment, a bad business environment when new taxes must be imposed to pay those huge public debt.
Bienvenido S. Oplas, Jr. is the president of Bienvenido Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers
