News Analysis: ASEAN economic integration: its impact on the Philippines

MANILA, Nov. 5 (Xinhua) — In any major undertaking, especially if it involves countries with different economic structures and stages of development, there is bound to be different views and expectations.

While the Philippine government is enthusiastic about the benefits that the country can get from the establishment of the ASEAN Economic Community (AEC) by yearend, the private sector has expressed some doubts.

The AEC, as envisioned by the Association of Southeast Asian Nations (ASEAN), will strengthen intra-regional trade and the free flow of capital, goods, skilled labor and services within the regional grouping’s 10 member countries.

In a statement issued in September, Secretary Gregory Domingo of the Department of Trade and Industry (DTI), the main agency tasked with implementing the Philippine participation in AEC, said that the country is “well-positioned” for the integration.

Domingo said that the country’s stable economic performance, along with the various reforms it implemented, has put the Philippines in a good position to benefit from the economic integration.

“The country is in a sweet spot. We have been experiencing robust economic growth, consistent upward rankings in competitiveness, and successive credit rating upgrades,” Domingo said.

He said that what the Philippines needs is to improve its competitiveness and the capability of its local industries to fully benefit from the AEC.

But Domingo’s rosy projections, representing that of the Philippine government, are not shared by the private sector.

Manuel Pangilinan, a Filipino business tycoon, said on Monday that the Philippines is not yet ready for economic integration with the rest of ASEAN.

In an interview with the Philippine Star, a leading Manila daily newspaper, Pangilinan admitted that while regional economic integration would definitely happen “it will not happen in our lifetime” because of politics.

Pangilinan, who chairs three giant Philippine corporations, namely the Philippine Long Distance Telephone Company, Metro Pacific Investments Corp., and the Manila Electric Co., said that under the AEC, the Philippines would face tougher competitions from other ASEAN members.

He cited sugar, which is one of the Philippines’ main agricultural products. “It is cheaper to import sugar and this will be good for Filipino consumers but this will displace four million people from their jobs,” Pangilinan said.

He said that any sitting Philippine president cannot allow 4 million Filipinos to go hungry. “It will be suicide,” Pangilinan said.

Nestor Tan, president of the BDO Unibank, Inc., the country’s largest bank, also told a recent business forum that while the Philippines is an attractive market, it has no means to compete with other developed ASEAN countries.

Tan said he is worried that Philippine banks are not ready to compete with the bigger banks of neighboring ASEAN countries when the AEC is fully operational.

According to Tan, ASEAN integration could have a downside for the region, particularly to the banking industry. “For banks, we expect heavier requirements, the byproduct of global standards,” he said.

But Benjamin Diokno, economics professor of the University of the Philippines, said that the AEC could further push forward the country’s economic growth due to higher demand for local products in the ASEAN market.

In his recent column in one of Manila’s business daily, Diokno said that the increased labor mobility in the ASEAN market could provide more job opportunities for Filipinos, which might ease up the serious unemployment at home and further increase remittances from overseas Filipino workers (OFWs).

Diokno, a former budget secretary, said that the Philippines has an advantage in the service sector because of its huge supply of English-speaking workforce.

“At the same time, business firms might be attracted to locate in the Philippines because of the big pool of English-speaking labor supply,” Diokno said.

Founded in 1967, ASEAN groups 10 countries at varying levels of development, namely Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

It offers a growing consumer market of more than 600 million people. Its gross domestic product (GDP) reached 2.57 trillion U.S. dollars in 2014.