REVIEW
of
FINANCE -
November, 2018
61
In the context of globalization, foreign trade
activities in general and commodity export
activities in particular of the countries are
expanded to the direction of development.
However, according to comments of ASEAN
economists, the export of Philippines is not
relevant to its real potential.
result is relevant with given arguments in
research hypothesis and in previous studies of
international trade. In fact, when two countries
are in the same international trade body, they
benefit from policies and particular favorable
conditions that the non-member countries do not
have. This is also the reason why participation
into regional and global free-trade agreements is
becoming a popular trend among countries.
The dummy variable of mutual language
between the Philippines and import country
(LANGij) with positive coefficient shows the
direct impact on the export of the Philippines
with significance level less than 10%. This
result is relevant to the theories and practices
from previous studies of international trade.
This means that when the countries have trade
relationship and use the same language, the
trade activities will be easier than the countries
that do not have the same language. For the
Philippines, this is a considerable advantage as
the major language in the Philippines is English,
the most popular global language. In the future,
in order to boost the export to global market,
the Government of the Philippines, agencies
and individuals need to take and promote this
advantage.
Other variables such as economic openness
of the gross economy of the Philippines and
import country (OPENit*OPENjt), FDI into
the Philippines (CAPit) and the economic
development gap between the Philippines and
the import country (EDISijt) do not show, or are
not significant enough to show the impact on the
export of the Philippines as the coefficients do
not have acceptable significance levels of 1%, 5%
and 10% (see Table 02).
Conclusion
The analysis shows that the use of gravity
model explains clearly the impacts of the factors
on the export of the Philippines. Among the
positive factors, the gross GDP (GDPit*GDPjt)
is the strongest factor impacting the export of
the Philippines for the past years. It means that
economic scales of both the Philippines and the
import country grows, they will increase the
export value of the Philippines. The variable
of geographic distance is the most challenging
factor to the export activities of the Philippines.
Following are the inflation, aggregated
population of the Philippines and the import
country. Therefore, together with globalization
trend, the export of the Philippines needs to
be diversified in different markets but nearer
markets are more favorable. In addition, the
Philippines’ Government should take flexible
financial policies to control inflation and
reduce the impact of this factor on the export
activities.
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