Are we prepared for Asean integration?

BY the end of this year, the 10 members of the Association of Southeast Asian Nations (Asean) will proceed with regional integration by creating the single-market Asean Economic Community (AEC).

Transforming the region into a highly competitive market for global trade was first discussed by Asean leaders in a summit in Kuala Lumpur in December 1997, with 2020 as the target date. In their Bali summit in October 2003, they agreed to push through with this plan. Four years later, in November 2007, they reached consensus on bringing the AEC closer to reality much earlier—2015.

For the Philippines, the question that must be answered is: Are we prepared for regional economic integration and fierce economic competition?

If we are to believe Gerardo Sicat, former director general of the National Economic and Development Authority and ex-World Bank senior executive, the Philippines would be put at a disadvantage since it has yet to implement the reforms needed for it to take advantage of the expected greater free trade under the AEC.

As Sicat explained, free trade will “enhance the competition among the traders and producers within the region…. Those countries with the freest and most flexible policy mechanisms will gain the most, while those burdened with domestic restrictions will be slowed down by those restrictions since they could prevent or cause investments from happening.”

Leaders of local and foreign-business groups also agree that much still has to be done to make the Philippines adapt to greater free trade under a single regional market. The Philippine Business Group-Joint Foreign Chambers (PBG-JFC), consisting of 18 of the biggest and most active local and foreign-business organizations in the country, in a letter to President Aquino dated May 15, listed eight proposals for prompt Executive action and seven more proposals requiring swift congressional approval so that we can improve our competitiveness, attract more foreign investments and boost the Philippine image in the international community.

Among the PBG-JFC’s proposals are the formation of a public-private energy council to solve the power crisis; reducing the Foreign Investment Negative List of industries, where foreign participation is limited; and fast-tracking the implementation of critical infrastructure projects.

The PBG-JFC is also urging the passage of several priority bills in the third and last regular session of the 16th Congress. These are the Fair Competition Act, Freedom of Information Act, and comprehensive reforms in the personal and corporate income-tax system.

The business community is also asking the government to approve Resolution of Both Houses 1 (RBH 1), authored by House Speaker Feliciano Belmonte Jr., which, it says, will encourage more foreign investors to come in.

The government cannot simply dismiss nor ignore the recommendations of the PBG-JFC as this is the umbrella group of practically all of the country’s largest business groups. They include the Philippine Chamber of Commerce and Industry, Makati Business Club, Management Association of the Philippines, Employers Confederation of the Philippines, Philippine Exporters Confederation, Semiconductor and Electronics Industries in the Philippines, American Chamber of Commerce, European Chamber of Commerce, Chamber of Mines of the Philippines, and the Philippine Association of Multinational Companies Regional Headquarters Inc.

The recommendations of the PBG-JFC make sense because, for one thing, the Philippines is trailing behind the Asean frontrunners—Singapore, Thailand, Malaysia and Indonesia—in attracting foreign direct investments (FDI). As we pointed out in a previous column, Vietnam has already overtaken us in enticing FDI and is poised to leave us biting the dust with its recent decision to lift caps on foreign investments. The Philippines has also been unable to match our Asean neighbors as far as per-capita income is concerned. We remain in the ranks of low-middle income countries, while our neighbors Thailand and Malaysia have moved up to the category of upper-middle economies.

The PBG-JFC proposal that should merit swift congresssional action is Belmonte’s RBH 1, which seeks to lift the 60-40 rule in the 1987 Charter. This provision requires Filipinos to own at least 60 percent of local businesses and for their foreign partners to own a maximum of 40 percent of these firms.

Another business group, Philippines Inc., an alliance of some of the most respected leaders in the country, has also thrown its support behind RBH 1: “By relaxing the limitations on foreign ownership, the Philippines will be able to maximize its benefit from the Asean integration and create much-needed jobs for the Filipino people…. To realize inclusive growth, the country needs to further accelerate the velocity of growth by instituting a more open policy regime that nurtures a globally competitive investment climate that must be sustained beyond political timelines.”

Belmonte’s resolution calls for adding a five-word phrase—“unless otherwise provided by law”—to seven economic provisions of the 1987 Charter to allow greater participation of foreigners in Philippine businesses. With the insertion of this phrase, RBH 1 will remove restrictions or caps on foreign investments through simple legislation that needs to be approved by both the Senate and the House, and later subjected to a plebiscite.

RBH 1 will not only make the Philippines more attractive to investors, it will also make us more adequately prepared for Asean economic integration.

Starting off on the wrong foot

This project is well-intentioned, to be sure. We’re referring to the hydroelectric power project in Rodriguez, Rizal, which, when completed, is expected to provide 500 megawatts to 1,000 MW of pumped storage power capacity for peaking use in the Luzon grid and to supply water to Metro Manila. But good intentions must also be matched with good deeds at all times. We’re informed that the project implementor, San Lorenzo Ruiz Builders (SLRB), may have begun to jeopardize other development activities in the area, particularly the reforestation projects of the Department of Environment and Natural Resources (DENR).

Recent inspections of the area at the summit of Mount Puro showed that large tracts of forest land had been cleared by heavy equipment used to build an access road. Many crushed saplings were also sighted.

A complaint was lodged with the DENR Provincial Environment and Natural Resources of Antipolo City, which led to the issuance of an order for SLRB to suspend their operations.

This order apparently went unheeded as subsequent inspections showed that other areas were cleared as well, at the expense of reforestation efforts. The project site is the Marikina watershed, which is the source of the Marikina River. Every typhoon season, the Marikina River threatens to overflow its banks. The reforestation projects in the area are intended to stem the flow of water into the river during the rainy season.

Now that the rainy season is here once again, we shudder to think of what would happen if another strong typhoon like Ondoy would hit the area, just like in 2009. –Ernesto Hilario, Businessmirror

E-mail: ernhil@yahoo.com.