IV.

The Future as Seen by Experts

Globalization is a phenomenon in the earliest time of primitive form of humans and as a

result of globalization, the greatest civilization occurs wherein various technologies and tools were

invented With several data present in the web and in paper, globalization has various whether it

is positive or negative, depending in which part of the region you are located. With the rapid

growth of our community in various aspects, the progress is somewhat hard to overlooked since

the people are either enjoying it or suffering from it. As it was said, the globalization was seemed

to be driven in three major forces, technology, deregulation and globalization of all products and

financial markets like banks. It is strategic to know the root of the financial globalization to be able

to foresee the upcoming results of this globalization since there are drivers that influence the

effects of globalization. For instance, foreign exchange rates, investments, franchise, outsourcing

and a lot more (Pologeorgis, 2019).

According to Frederic S. Mishkin, published journal (2007), after the World War II, new

financial institutions were organized and formed in promotion of globalization and as seen by the

experts, they were successful. These financial institutions are International Monetary Fund (IMF),

the General Agreement on Tariffs and Trade (GATT) and the World Bank. Aside from these facts,

it was known that financial globalization was confined to rich countries located in northern

hemisphere and the globalization happening in the world is far from over and it is expected that it

will grow bigger and will able to reach poor countries (Obstfeld and Taylor, 2004).

Financial development does not happen in poor countries is because there are constraints

within the internal processes of the country. Few reasons mentioned in his article is the: Tyranny

of collateral. It is said that collateral is a tool in aiding the financial system in general. And loans

with collateral has some consequences since if a borrower turns out to be insolvent, the creditor

will sell the collateral to make up for the losses. 2. Underdeveloped regulatory system to promote

transparency (Mishkin 2007). Without wide range of information by the government the
transparency is being compromised and resulting into unfortunate events wherein the regulatory

apparatus of developing and transition countries retards the provision of adequate information to

the marketplace. With these in mind, since Philippines is still a developing country for a very long

period of time, the government could improve the financial and banking sector of the country.

20 years ago, Asian countries faced a financial that took the world by surprised, and this

event was a turning point for a region in Asia in terms economies. The Asian Financial Crisis

(AFC) exposes glitches in terms of structural weaknesses and policy distortions especially to

those who got affected in crisis. Furthermore, poorly planned financial liberalization and

premature capital account opening was exposed. Economic and financial policy reforms are the

aftermath of the crisis happened in Asian countries. (Lee, J et al, 2017).

Despite Asia having significant improvements in financial management and economic

status, Asian regions continues to face challenges. And with these challenges in mind, Junkyu

Lee et al (2017) said that Asia should not be complacent and addresses enhancing financial

resilience and mobilizing long-term finance to address challenges. Remaining vulnerabilities are

prevalence in US dollar-denominated debts by regions, US dollars affecting domestic financial

conditions and Non-Performing Loans should be monitored to avoid loss of confidence in banking

system.

In concluded forum from vast senior officials from central banks that was held at the Bank

International Settlements in June 2012, Ravi Menon gave a speech about Financial Globalization

wherein his premise is the rebalancing and restructuring the Asia’s economic growth. With his

view in mind, Financial Globalization has two main aspects wherein free flow of capital, and high

foreign participation is very noticeable. He added that for over the next decade in global economic

landscape, there will be fundamental forces such as deleveraging in advance economies.

in terms of growth. Next is re-regulation globally. Financial intermediation globally with be much

less. And lastly, he said that there will be demographic change globally. There will be shifting

happening in consumption demands since ageing in population in Advance economies will rise

and affluent middle class in Asia. Menon also mentioned that this calls for creation of policies to

encourage greater consumption spending in some countries and move investing spending in

others.

With foreign direct investments happening in our country, by that Philippines is

experiencing financial globalization and its resulting positive results Merez, A. (2018) reported

that Philippines is the second place in top globalization destiny in the world. The result was

according to global strategic advisory firm Tholons. In the report, it was noticeable that developing

countries such as Philippines, together with India and Brazil clinches the top spot in the list

surpassing developed countries like United States, Canada and Russia. Furthermore, the scale

that index used to evaluates the cities are categorize in various aspects such as availability of

human resource, infrastructure, innovation and especially business catalyst or the level of industry

related activities. Miskin have studied with globalization in finance are only confined to advance

economies such as United States, Russia and China. It was contrast to what Miskin have studied

with globalization in finance are only confined to advance economies such as United States,

Russia and China. In addition, globalization has its various effect, and it continues to change and

becoming more unpredictable.

Business World website has released an article stating that the local franchise industry is

confident on reaching 1 trillion revenue in the year 2018. It was forecasted that there will be 15-

20% growth that will be happening and economist are positive about it as per President Richard

V. Sanz told the press during a press briefing happened in Makati. In addition, Philippine

Franchise Association Chairman Emeritus Samie C. Lim noted that the growing foreign
investment will be the number one driver of financial globalization and it was projected that in the

year 2020, revenues will boom at 1.3 trillion. It was reported that to be this possible, the basing

projections on a conservative 10% annual growth.

However, a study was conducted by Roperto Deluna Jr and Antiquisa Chelly (2014)

students of University of Southern Philippines, their research entitled Economic Growth, Financial

and Trade Globalization in the Philippines, they have conducted to a result that Philippines was

far behind to the benefits of financial globalization. With the level of openness of a country is not

enough in which resulting to economic growth, it hinders the country to enjoy the benefits.

The challenge that was mentioned in the study is putting emphasis on making financial

regulation stronger, and it was regarded as problems of development. Constraints such as the

existence and continuous increase of external debts that are affecting the capital inflow and

secondly, unanticipated capital flow that causes destabilizing effects not only in Philippines but

globally. Briefly, developing countries need foreign capital to grow, but foreign capital can be risky.

The researchers also presented recommendations based on the outcome of the said

research. It is known that Philippines is a developing country, it is empirical that Philippine

government and monetary authority should put more attention to implementation of appropriate

policies to open more global market and participate in their activities. In correlation,

enhancements in domestic financial system should give priority. Moreover, having an economy

that is opened globally could build a strong international financial system to prevent crises and

market shocks that happened from 1980s, 2007 and 2009.

In line with this, global financial markets are not safe from nightmare scenario one day. It

is hard to tell when these nightmares will come but there are events that could set up as a stage

for these nightmares to happen. These events are emerging market crisis that are somehow alike

to the Tequila and Asian currency crisis in early to late 90s. Devaluation of market economies
with a large dollar denominated debt could be trigger. Corporate failures are high potential which

will lead to weakening of investors confidence in trading to public companies (Mourdoukoutas, P.,

2019).

Philippine Institute for Development Studies (PIDS) have been developing a

comprehensive and detailed strategic plan that aims to develop financial sector for long-term

benefit of the country. It was disclosed that the Financial Sector Development: A Review would

consist of reforms that would help identify weaknesses and vision of inclusive financial sector that

would support the economic growth of the country. Melanie Milo said that financial regulatory

framework shows that key domestic regulations remain restrictive. In addition, she said that the

goal will be more “diversified, dynamic competitive and resilient financial system” (Gatpolintan, L.,

2019). In line with future nightmares that could possibly hit anytime, Philippines has been

developing precautionary measure not only to avoid but to mitigate the possible effect of future

global crisis. This is important to undergo this process since it has been mentioned that the

fluctuating dollar could affect the growth in the economy of the country who has dollar

denominated debts like Philippines.

Foreign

Bank for International Settlements (2012). The Future of financial Globalisation.

Lee, Junkyu et al (2017). 20 Years After the Asian Financial Crisis: Lessons Learned and Future
Challenges.

Mishkin, Frederic, S. (2007). Is Globalization Beneficial? Journal of Money, Credit and Banking, Vol.
39, No. 2–3. , Ohio, United States of America: Ohio State University.

Mourdoukoutas, Panos. (2019). A nightmare scenario for Global Financial Markets. Retrieved from:
https://www.forbes.com/sites/panosmourdoukoutas/2019/08/24/a-nightmare-scenario-
for-global-financial-markets/#550ade56183a

Obstfeld, Maurice, and Alan M. Taylor. (2004) Global Capital Markets: Integration, Crisis and
Growth. Cambridge, UK: Cambridge University Press.

Pologeorgis, Nicolas, A. (2019). How Globalization Affects Developed Countries.

Local

Deluna, R., Jr. & Chelly, A. (2014). Economic Growth, Financial and Trade Globalization in the
Philippines: A Vector Autoregressive Analysis.

Gatpolintan, Leslie. (2019). Long-Term Strategic Plan to Develop the Financial Sector Pushed.
Retrieved from: https://www.pna.gov.ph/articles/1073417#

Lim, Janina C. (2018). PHL franchise industry seen to grow by 15-20% this year. Retrieved from:
https://www.bworldonline.com/phl-franchise-industry-seen-to-grow-by-15-20-this-year/

Merez, Arianne. (2018). Philippines is world’s second top globalization destination: index. Retrieved
from: https://news.abs-cbn.com/business/10/20/18/philippines-is-worlds-second-top-
globalization-destination-index.