Decoupling

Decoupling can actually be a strategy to mute the critics because experiential benefits will always win the day for a nation tired of complaints and not being able to see any good from all the work done.


Note: This column originally appeared in The Manila Times on September 15, 2020

Decoupling seems to be the norm these days. The main street is decoupling from Wall Street in the United States (US). The US has been preparing for years to decouple from China. The United Kingdom has decided to decouple from the European Union. India flirted with decoupling from China but decided to pursue a nuanced approach due to being a major pharmaceutical supplier in the world: “However, about 70 percent of its active pharmaceutical ingredients, the key components for making medicines, come from China.” There is the decoupling of natural resource use and environmental impact from economic growth, of politics and economics, and even of education from face-to-face learning. There is decoupling from big malls of small chains of mom-and-pop stores due to less crowds and the like.

To decouple is to “separate, disengage or dissociate.” Decoupling is also the “breaking of links between customer activities, by a digital player, that have been traditionally been provided together.”

With Covid-19, we should have been able to address the issues globally, but there is no leadership filling the void at that level. It is hard for governments to come together and address the pandemic. Hopefully, the search for the vaccine can get leaders to meet as one and build a consensus on how shared knowledge can lead to the manufacturing of the vaccines because allocation and price are becoming tenuous issues for all.

According to the World Bank, “the global economy has experienced 14 global recessions since 1870: in 1876, 1885, 1893, 1908, 1914, 1917-21, 1930-32, 1938, 1945-46, 1975, 1982, 1991, 2009 and 2020. The Covid-19 recession will be the deepest since 1945-1946 and more than twice as deep as the recession associated with the 2007-2009 global financial crisis.”

It further pointed out that the “Covid-19 global recession is unique in many respects. It will be the most severe since [World War 2] and is expected to trigger per capita GDP (gross domestic product) contractions in the largest share of economics since 1870. It is also associated with unprecedented weakening in multiple indicators of global activity such as services and oil demand as well as declines in per capita income in all emerging market and developing economies (EMDEs) regions.”

The decoupling becomes very visible when one looks at Asia in contrast with the United States. With Covid-19, everyone thought that the drag in the economy will be sharp and long. Recession was often quoted and various curves have been invoked to visualize the severity of the situation. But by March 2020, China’s export value “rose 8.5 percent year-on-year, diverging widely from analyst forecasts, which foresaw a 12-percent decline. Strong exports growth to Asia, and especially Southeast Asia, fed the unexpected improvement.”

The March data shows increase in Asian economic integration “in which a larger portion of Asian trade is directed towards Asia itself. While America contemplates decoupling from China, it seems that Asia is decoupling from the US.” In the semiconductor industry, the buzz has been loud on the “de-Americanization of supply chains.”

And this is where global shifts are felt. With a population of 23 million, Taiwan has 10 deaths due to Covid-19. With a limited number of countries according it recognition, Taiwan proved that “open source and open governance” were the way to go without locking down the economy. “If there is an obvious, easy-to-apply protocol to control a pandemic, the world’s most advanced healthcare systems generally missed it. On a per-capita basis — cases per million — the US currently ranks tenth in the number of Covid-19 deaths per million inhabitants; well behind Sweden, France and Belgium.”

In the country, critics keep painting a canvas that drills on the leader and hits his cabinet like there is no tomorrow. Six months into the pandemic and critics are asking for a plan. Clearly, politics’ ugly head is now the name of the game. In Taiwan, the nation “doesn’t expect infallibility from its leaders. Instead, Taiwan made sure that its health institutions are hypervigilant about epidemic risks. After the SARS epidemic of 2003, Taiwan set up an interlocking set of agencies geared toward the early detection of pandemics and bioterrorism. If a threat is detected, containment plans and supply stockpiles are ready. That process starts at the bottom, not the top.”

The Philippines relied too much on the World Health Organization (WHO) and that old hand: groupthink. While Taiwan was “out of the WHO and other international organizations, Taiwan’s isolation from WHO paradoxically helped the country by forcing it to rely on its own judgment on health issues.”

Fifteen years ago, the Philippines was named and became part of the Next Eleven or N-11. It refers to the 11 countries, namely Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey and Vietnam, that were identified by the Goldman Sachs investment bank as having a high potential of becoming the world’s largest economies in the 21st century. The bank “chose these countries with promising outlooks for investment and future growth on Dec. 12, 2005.”

The criteria adopted by Goldman Sachs were macroeconomic stability, political maturity, openness of trade and investment policies, and the quality of education. Although the 11 countries varied geographically and economically, these have common features that are believed to single out high economic potential. All have large and growing populations. Between 1980 to 2008, population growth was highest in Pakistan at the rate of 110.8 percent with South Korea as the lowest at 28.4 percent growth. Among the N-11 countries, Indonesia had the largest population as of January 2008 with 228.9 million people while South Korea had the smallest at 47.6 million people. In 2006, Mexico had the highest sum of private final consumption expenditure with a total of $567 billion. Vietnam had $36.8 billion as the lowest.

All of the 11 countries demonstrate population growth rates above those of Western developed economies that indicate a greater consumer market potential over the medium term. Large populations represent a wide potential pool of consumers for businesses to market while high growth rates mean that this market will expand rapidly, providing more potential customers proportionally. The sweet spot of Philippine demography is becoming one clear driver to its consumption economy, which is now more felt online.

But what stands out in the N-11 are three countries in Southeast Asia. These are Vietnam, Indonesia and the Philippines or VIP. Inspiring rather than supervising is the way to go in decoupling.

The Philippines is no longer the “Sick man of Asia.” It is not a Third World country but a middle economy. “We are the world’s “33rd largest economy by nominal GDP,” according to 2019 statistics of the World Bank. We are the “13th largest economy in Asia and the 3rd largest economy in Asean (Association of Southeast Asian Nations) after Indonesia and Thailand. We are the 6th richest in SEA (Southeast Asia) by GDP per capita values after the regional countries of Singapore, Brunei, Malaysia, Thailand and Indonesia.”

The year 2020 is about to end in three months’ time. The economy is inching as we go through the various gating protocols in public health. Forward planning at the local and the national levels is critical and part of the learning curve in governance. Though politics is now at high decibel levels, the launch of completed projects is the only way to drown things. Letting the achievements do the talking and focusing on seeing things done are critical in the endgame.

Decoupling can actually be a strategy to mute the critics because experiential benefits will always win the day for a nation tired of complaints and not being able to see any good from all the work done.

 

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About the Author
Malou Tiqiua is the Founder/General Manager of PUBLiCUS Asia Inc. A noted political management expert in the Philippines and Asia, she brings over 20 years of professional experience in public, private and the academe combined. Author of the comprehensive book on electoral campaigns in the Philippines, "Campaign Politics", Malou is a graduate of the University of the Philippines with a Political Science degree and a Master of Public Administration. She completed her second master's degree (MA in Political Management) from the Graduate School of Political Management, George Washington University.
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