RP missing out on ASEAN opportunities? (First of two parts)

“ARE YOU a domestic manufacturer hurt by the sudden surge of imports?,” asked an ad for a seminar held last month. “Do you want to take action on these matters? Then this seminar is for you,” it continued.

Apparently effective, some 20 businessmen and lawyers subsequently attended a course on raising trade disputes against competing imports.

Two weeks later the Association of Southeast Asian Nations (ASEAN) marked its 43rd anniversary. Most products traded in the bloc — at least among the six earliest members including the Philippines — can today cross borders duty-free.

“The people need to be made aware of the benefits of ASEAN,” the organization’s Secretary-General, Surin Pitsuwan, said during the anniversary ceremonies in Vietnam.

The Philippines, however, seems to be missing out on these gains especially as the country’s exports to its fellow ASEAN members continue to make up a small share of total outbound shipments.

Meanwhile its Southeast Asian neighbors have become more adept at luring manufacturing investments to take a larger part of the envisioned regional assembly line.

“We don’t really export to Southeast Asia since we have similar products,” said Sergio R. Ortiz-Luis, Jr., Philippine Exporters Confederation president.

“Also, pricing isn’t as attractive when their domestic products are cheaper,” Mr. Ortiz-Luis added.

The hesitation is apparent. Philippine export sales to the region accounted for just 8.7% of total sales to the world in 2009 after peaking at just over a tenth in 2003, according to central bank data. This was little changed from the 7.2% share the region accounted for in 1999 when Cambodia completed the 10-member regional bloc.

The Philippines, on the other hand, sourced 16.8% of its imports from ASEAN member states in 2009, roughly double the 8.8% share the region cornered ten years back.

Experts reckon the trade imbalance partly stems from the makeup of the Philippines’ export portfolio, which caters more to non-ASEAN members. More importantly, it could also be due to the country’s inability to attract investments that would have made it a more active player.

“Your disadvantage is you’re concentrated in one industry,” said Ganeshan Wignaraja, principal economist of the Asian Development Bank’s office of regional economic integration.

Roughly two-thirds of the Philippines’ export sales are brought in by electronic components, most of which are shipped off to non-ASEAN members Taiwan, Japan and China for further assembly.

Finished goods like furniture, garments, and processed food, meanwhile, mostly bypass the region as the Philippines’ niche in higher-priced products find more willing consumers in richer economies.

“And there are more investors in other ASEAN countries,” Federation of Philippine Industries President Jesus L. Arranza said.

As such, neighbors like Thailand enjoy higher export sales as they have been selected by multinationals as production hubs to supply the region, he explained.

In the automotive industry, for instance, Thailand continued to lead the pack last year by churning out 1.2 million cars for both domestic and export markets while the Philippines only assembled 50,000 units, data from the Motor Vehicle Parts Manufacturers Association of the Philippines showed.

The gap could widen as the local arm of Ford Motor Co. has announced that it would start manufacturing Focus sedans in Thailand instead of the Philippines by 2012, although it is reportedly mulling a new model for assembly here.

And while the country boasts of its own share of manufacturing operations — Nestle Philippines and Philip Morris Philippines Manufacturing, Inc., among others, ship out products to the rest of the region — this is dwarfed by investments in other ASEAN members.

Last year, the Philippines lured only 5.3% of the $36.803 billion worth foreign direct investment that flowed into the region, according to United Nations data. –JESSICA ANNE D. HERMOSA, Senior Reporter, Businessworld