Scenario setting for Afta 2015

The coming integration of the Asean (Association of Southeast Asian Nations) economies in 2015 has been giving sleepless nights to our manufacturers, exporters and other members of the business sector, and to the labor sector who has not yet reached the level of employment which is commensurate to the  “winning” growth rates that our economy has been achieving in recent years.

The integration will allow products and services to enter each other’s markets, encouraged by much reduced tariffs and red tape.

No amount of comforting words from government officials can seem to assuage business and labor leaders especially those in manufacturing and services, agribusinesses, consumer products, and light industrial goods.

“Not only can we not penetrate our neighbors’ markets due to our non-competitive situation, they will be able to walk all over us right here in our market due to their comparative advantages,” they moan. This is the double whammy they fear the most.

On the other hand, a number of  prominent businessmen are very bullish about Afta 2015 because of their belief that the country will benefit on a net basis. With a competent labor force and favorable macroeconomic fundamentals, the country will achieve its comparable advantages especially as investments will then flow freely across the region.

The economists point to the resilience of the country against global shocks and the higher confidence we now enjoy from external partners due to the improved governance. However, the Doubting Thomases in the business and labor sectors claim that they are the foot soldiers who will be expected to fight the battle for the customers’ purses. They are not sure if the Philippines is ready for integration because of the shortcomings in the regulatory environment, infrastructure and economies of scale.

Some industries are being assisted by relevant government agencies to prepare gameplans and minimize the expected damage. However, it is apparent that certain agencies have not been too well briefed about the purpose of gameplanning. Labor Secretary R. Baldoz reportedly complained that the Sugar Regulatory Administration concentrated too much on achieving self-sufficiency of the commodity despite the looming loss of jobs, instead of building up the sector’s comparative advantages to increase the opportunity to cater to a bigger market, and, consequently, to employ more people.

Is Afta 2015 going to be a zero-sum or a win-win game? I believe that the fear of facing international competitors is so overwhelming to those who lack the confidence so necessary to participate in the global markets that we have to take a more supportive tack to inspire our teams.

In an earlier article, I wrote about scenario setting, a management technique which is being used by big corporations to help them anticipate the future and prepare them to understand the many decisions or challenges that have to be taken into account with every changing set of variables. This technique can be applied to our top list of products and services that may be the big winners (or big losers?) come 2015. And it needs to be done to ensure that our teams will end up on the positive side of the scale.

There are experts on this technique within our midst, such as Shell, Unilever, LI & Fung, etc., who can be encouraged to assist the sectoral teams in developing their plans. The Management Association of the Philippines can take the lead role, together with the sectoral champions and policy officials.

This approach is in line with the MAP-NCC Proactive Strategy for Inclusive Growth, which dovetails with the National Economic and Development Authority’s new Economic Model. The scenario planning may start with the sectors that will have the most to gain, or to lose, from the economic integration of the Asean states in 2015. These sectoral products/services previously have been identified as having latent comparable advantage once binding constraints are resolved. Also, these products/services will share the common features of high linkages with other sectors, regional cluster-bases and value addition with high labor inputs (see table for the list of key sectoral products).

The next step is to have the teams organized with twin champions from the official and business sectors. The Cabinet Economic Cluster is envisioned to take the executive coordinating role for the President, with a counterpart MAP/NCC advisory board of eminent business leaders whose names we have proposed earlier to some cabinet members.

We are discussing this approach with key public officials to help the government encourage its constituents to face the new opportunities with enthusiasm. There are certainly threats to be aware of, but the opportunities for substantial gains are there.

(The author is chair of the MAP national competitiveness committee and of CIBI Information Inc. He was former secretary of DTI and former private-sector co-chair of the National Competitiveness Council. Feedback at [email protected] and [email protected]. For previous articles, please visit map.org.ph)