THE

GOVERNMENT
SECTOR AND
THE GLOBAL
ECONOMY
Lesson 12
Motivation
There are two types of people who
will tell you that you cannot make a
difference in this world: those who
are afraid to try and those who are
afraid you will succeed."

-- Ray Goforth
Objectives
• At the end of the lesson, the students should
be able to:
1. Identify and explain the various
socioeconomic factors affecting business
and industry
2. Discuss the government sector and the
global economy
3. Enumerate the economy’s producing sector
4. Analyze the competitiveness and efficiency
of the economy
The Government Sector and the Global Economy

Two Relevant
Units in the
Flow

Foreign
Government
Countries

- It buys economic resources from the household and - Buys our product and pays for the goods –
makes money payments to the resource owners Exports (money flows into the economy)
- It buys goods and services from the producing units -Sells their products to us and we pay for the
for which it makes money payments. goods – Imports (money flows out our economy
The Economy’s Producing Sector

The economy has tree main producing Sectors

Service
Industry 1. Trade
2. Transportation,
1. Manufacturing
Agriculture, Fishery and Communication, Storage
2. Construction
Forestry 3. Banking and Finance
3. Electricity, Gas, and Water
4. Public Service (Government)
4. Mining and Quarrying
5. Real Estate
6. Private Services
AFRICULTURE, • Soil, water, and forest
FISHERY, AND • Vulnerable to climate change
FORESTRY • From this sector comes our food and
raw materials
 • Processes raw materials from agriculture,
fishery and forestry and converts it to final
INDUSTRIAL products
SECTOR • Goods-producing segment of an economy
• Also known as secondary sector
 • The service sector produces the
intangibles supporting and
complementing production in the other
sectors as well as among its own
industries.
SERVICE
• Produces no goods but provides a service
SECTOR that satisfies a need.
• Education, health, food, finance,
government, transportation,
communication and trade are service
sectors.
 The fair ranking of the Philippine in
world competitiveness means that
the country’s industries are yet on
their way from the factor driven to
the efficiency stage.
Competitiveness
and Efficiency The Global Competitiveness Report
2013-2014 of the World Economic
Forum (WE), the country ranked
number 58 among the 148
countries on the list.
Competitiveness and Efficiency
Global Competitiveness Index

Basic requirements Efficiency enhancers Innovation and

sub-index
Pillar 1. Institution
Pillar 2. Infrastructure
Pillar 3. Macroeconomic
environment
Pillar 4. Health and primary
education
sub-index sophistication factors sub-
index
Pillar 5. Higher Education and
training
Pillar 6. Goods market efficiency
Pillar 7. Labor market efficiency
Pillar 11. Business sophistication
Pillar 8. Financial market
development Pillar 12.Innovation
Pillar 9. Technological readiness
Pillar 10. Market size

Key for factor-driven economies Key for efficiency-driven

economies Key for innovation –driven
economies

Factors for Global Competitiveness Index

 Labor Efficiency of ASEAN Countries in 2009

Labor Efficiency

South Korea

Taipeh

China

Thailand

Malaysia

Philippines

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000
Sectoral Shares Output &
Sectoral Shares Employment
Sectoral Productivity
Sectoral Productivity (2008)
100,000.00
90,000.00
80,000.00
70,000.00
60,000.00
50,000.00
40,000.00
30,000.00
20,000.00
10,000.00
-
AGRICULTURE INDUSTRY SERVICE
Agriculture and Fishery
Contribution of Local Production to Local Consumption (2008) (in
Percent)
105

100
99.7 100 99.7
95
94.8
90

85
84.7
80

75
RICE CORN FISH CHICKEN PORK
Average Palay Yield Among ASEAN Countries
(In Metric Tons Per Hectare)

6
5.68
5
4.86
4
3.86 3.84
3
2.82 2.82 2.65
2 2.44

0
VIETNAM INDONESIA MALAYSIA PHILIPPINES THAILAND LAOS MYANMAR CAMBODIA
 Average Palay Production per Person among ASEAN Countries, Average
for 2008-2010,
(In Kilogram per Person)
600

500 550
500
470
400 450

370
300
280
200
180
100
90
0
CAMBODIA LAOS THAILAND VIETNAM MYANMAR INDONESIA PHILIPPINES MALAYSIA
 Manufacturing

• In spite of the liberalization of foreign investment and trade, the

manufacturing industry is hardly competitive even in ASEAN Region due to
limitations of size and structural support.
• Almost all 89% manufacturing establishments are micro in scale with limited
access to competitive opportunities similar to agriculture and fishery.
• These light enterprises produce consumer goods – mostly 86% food
manufacturers – contributing the bulk 55% of manufacturing output using
low technology and skills.
• Lacking government support to deepen technology and production
 Trade and transport

• In spite of being the top grosser 34% of the biggest sector that is service, the trade
industry supported by the transport industry is also handicapped by the limited size of
each establishments.
• Almost all (92%) are micro in scale engaged in retail trade that contributes almost 1/2
(64%) total trade (Census of the Philippine Business and Industry, NSO 2012).
• However, the transport industry has a fair majority (73%) of the micro businesses
mostly engage in land transportation and transport support services (e.g.,
maintenance).
• Land transport accounts for almost 1/2 (46%) of all transport services while transport
support services accounts for the book (52%) of industry output
 Trade and transport

• On top of the limitations of size, 30% of the country's population.

• But crowding more in the same national Capital Region are more than ½
or (56%) both transport establishments in the country. On the other hand,
less crowded or 13% of trade and 8% of transport establishments in
nearby CALABARZON (Cavite, Laguna, Batangas, Rizal and Quezon)
Industrial zone serving 14% of the country’s population (Census, NSO
2010).
• At any rate, even businesses in this industrial zone or near support
industries in the Metro Manila we are almost 1/3 or 30% of
manufacturing establishments are also based.
 International trade

• Assembled electronic products top the country’s exports (40%) dominated by

manufacturers reflective of the countries wining agricultural sector (Philippines
Statistics Authorities, foreign trade statistics 2013).
• The assembled parts are imports from subsidiaries in the global networks of the same
multinational corporation's (example: Intel, Texas Instrument).
• These electronic parts are also countries leading imports (22%) followed by minerals,
fuel, machineries, and equipment, in the like.
• Almost all imports our semifinal and final manufactures in the absence of
intermediate product industries.
 International trade

• As already mentioned, electronic products hardly contribute to local

output and employment being import dependent and without much
need for technology.
• Unlike their counterparts in other sectors, their assembly plants are
mostly found in the CALABARZON industrial zone where support
industries in manufacturing and trade are also moving into.
 Tourism

• Tourism is an emerging industry as expenditures of foreign tourists

unrelated services such as hotels and restaurants, transport and
entertainment grew by 29% in 2012.
• Gaining importance as an industry, it contributed 6% the gross output of
the economy (NSCB, Tourism statistics 2012).
• It also figured as the third leading export of the country after electronics
and miscellaneous services, which include business process outsourcing
(26.9%).
• Most tourists prefer hotels for accommodation (80%) and cars for
transport facilities (42%).
 Tourism

• Most also prefer restaurants (68%) and avail of Internet access (51%)
in accommodating establishments.
• In addition, establishments concentrate operation in Metro Manila,
western, and eastern Visayas as most preferred tourist destinations.
• However, the industry mostly composed of micro enterprises (90%)
is yet to grow the fullest potential.
• The country lags behind even in the Asian region as tourist
destination with a minimal share (5%) in total arrivals in contrast to
Singapore (16%), Malaysia (30%), in Thailand (24%).
Tourism
Tourist Arrivals per 100 Population (2011)
250

200
200

150

100
88
50

30 7 4 3
0
SINGAPORE MALAYSIA THAILAND VIETNAM PHILIPPINES INDONESIA
 Small business opportunities

• Small farmers and fishermen can tap urban consumer markets and distribution centers
with cooperative efforts to minimize the limitations of size and inadequate farm to market
facilities.
• They can engage in the operative activities not only of sharing / collectively owning
resources to preserve freshness or delay perishability of goods at lower cost.
• Collectively, they can also gain direct and faster access to market networks the augment
higher products prices as well as cheaper production input.
• Let alone that they can access credit for expansion on collective credibility. However, more
government provisions of farm to market infrastructure like concrete road network can
boost the efficiency of cooperative market activities even of farmers and fishermen in the
hinterland.
 Small business opportunities

• The country's growing population also affords cooperating micro enterprises in the manufacturing, trade, and
transport of new consumer markets for growth and expansion.
• More micro manufacturers of light consumer products can find new markets in growing industrial and urban
areas like CALABARZON, away from overcrowded Metro Manila.
• Complementary and support industries are already gravitated towards this growing center, let alone the
concentration of government infrastructures and services promoting market efficiency.
• Thus, new micro trade and transport enterprises can complement or support the growing number even of
light manufacturers moving to these growth centers.
• To minimize the limitation of size, micro enterprises can form associations for Inter industry coordination and
timely availability of services.
• In addition, Manufacturers Association can improve market access on competitive terms.
• But more government provisions of physical infrastructure like concrete road network can greatly improve said
Inter industry coordination and market access.
 Small business opportunities

• In tourism industry, microbusinesses can help to maximize stores arrivals and

destinations with family support in substitute services for big establishments
strengthened by cooperative efforts.
• Car transport services can support hotel accommodations while lodging houses with
restaurants can serve as substitutes in the latter's absence.
• Microenterprises can also form Association for timely coordination with big
establishments and complementation among themselves.
• For the meantime, tourism and related services can concentrate operation in the
major tourist destinations such as Metro Manila, and the western and eastern
Visayas.
• However, better road networks can pave the way for the development of other
tourist destinations and services, which include transport.