PHL services sector a winner in 2015 ASEAN integration, agri likely to lose – business execs

Not all sectors of the economy will come out as winners once the single ASEAN market in enforced next year, according business executives of highly successful Philippine companies, who say there are obvious differences that will weigh on how a particular sector will fare under an integrated region of more than 600 million people.

The Philippine services sector is likely to emerge a winner once the Association of Southeast Asian Nations (ASEAN) economic integration is in place, but the agriculture sector is beset by a lack of both arable land and infrastructure to successfully compete in the regional space, the executives said in a forum Wednesday.

“In my view, one sector that’s going to win is the services sector… The loser is probably our agriculture sector,” Ysmael Baysa, Jollibee Foods Corp. CFO, told participants to the Economic Journalists Association of the Philippines (EJAP)-ING Bank Forum in Makati City.

Services also employ the largest number of the labor force, which grew by 4.8 percent or 929,000 workers, according to the latest Labor Force Survey released by the Philippine Statistics Authority last June.

Wrong notion

Assuming that all sectors will benefit in the regional integration is a wrong notion, Ysmael said.

“One way of looking at integration is: which sector is going to win and benefit and which sector is going to lose or suffer,” he said.

By 2015, the ASEAN Economic Community (AEC) sets in motion the creation of a single market spanning the 10-nation bloc that includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

The Philippines agriculture sector will find it hard to compete on a regional scale given the lack of land to plant in and infrastructure to transport products, JG Summit Holdings Inc. SVP and chief strategy officer Bach Johann Sebastian said in the same forum.

“We have the smallest arable land per capita in the whole of ASEAN. We have a lot of mountains, we have a lot of our population in agricultural areas but we are not an agriculture economy,” he said.

Sugar industry

In particular, the Philippine sugar industry is not competitive due to lack of planting areas, Sebastian noted.

“But that would be on the planting side, not on refining and milling side… and if you have efficiencies and economies of scale there, we can compete with Thailand and other countries,” he said.

Thailand is the second largest exporter of sugar in the world.

Data from the Bureau of Agricultural Statistics showed sugarcane output decreased by 7 percent from 28.4 million metric tons (MT) in 2011 to 26.4 million MT in 2012 and by 6.9 percent further to 24.6 million MT in 2013.

“The planting side is really a serious problem, because it is protected by limitations in sugar imports and they have not modernized,” Sebastian said.

The 2015 ASEAN Free Trade Agreement (AFTA) will bring the tariff on sugar shipped within the ASEAN member-states down from 10 percent starting this year to five percent in 2015.

Service-oriented economy

The Philippines is service-oriented and should take advantage of that in the upcoming integration, Sebastian said.

“We are a service economy… We should make hay with that, especially in tourism, which has a very big potential,” he added.

But milking the potential of the tourism sector will be hard without the necessary infrastructure in place, Sebastian said.

“In the tourism space, we will lose a lot of opportunity if we don’t improve our airports, roads,” he added.

“Do we have the best beaches in the world? Yes. Can we get to those best beaches quickly? No. It’s more fun in the Philippines, because it’s an adventure to get there and Secretary of Tourism is projecting the Philippines there,” Sebastian noted.

In 2012, the Tourism Department launched a new campaign to attract tourists dubbed “It’s more fun in the Philippines” which went viral over the Internet.

Only seven projects worth P62.6 were awarded in four years under the Aquino administration’s flagship public-private partnership program. – VS, GMA News