On Jan. 15, 2014, Ms. Teresita Sy-Coson of the SM group of companies was the keynote speaker in the induction ceremonies of the new trustees and officers of the Financial Executives Institute of the Philippines (Finex), led by my friend and fellow avid Blue Eagles fan, president-elect Edmundo Soriano.
Finex was lucky enough to have Ms. Coson as a guest speaker. She rarely accepts public speaking engagements. The ballroom was jam-packed. Surely, business leaders and professionals not only wanted to hear Ms. Coson speak, but more importantly, they wanted to get her insights on an all-important topic that is just around the corner: Asean economic integration.
Significantly, Ms. Coson is the Philippine representative to the Asean Business Advisory Council, or Abac, composed of business leaders in the Asean region.
Ms. Coson traced the history of the Asean economic integration to the Asean Vision 2020, signed in Kuala Lumpur in 1997, which envisioned “a stable, prosperous and highly competitive Asean Economic Region.” It was conceived on the premise that small economies like those of the Asean countries have to join forces in order to broaden the market and to capture greater investment opportunities.
A few years later, or in 2003, the Asean Heads of States signed the Bali Concord II that sought to establish the Asean Community, including the Asean Economic Community (AEC), by 2020.
The agreement called for a “broad-based integration covering political-security, economic, and socio-cultural issues.” It envisioned the “free movement of goods, services, investment, skilled labor, and freer flow of capital” to make the Asean region more competitive in the global market.
It was meant to “grow regional competitiveness by reducing the cost of cross-border trade—through simplifying visa processes, equitable economic development, low import duties, and the development of hopefully, a single market—which, as a result, would increase the flow of both people and goods between them.”
Ten years later in 2007, in Cebu, Philippines, the Asean member countries agreed to “accelerate the establishment of the Asean Community, including the AEC pillar, to 2015.”
Ms. Coson frankly admits that political and cultural differences stand in the way of a timely Asean economic integration. The known obstacles are many, including “multiple bureaucratic costs, some confusion in terms of regional and national legal applications and jurisdictions, and lack of active promotion.” These pose problems for companies that wish to operate seamlessly within the region.
Ms. Coson informed the Finex members that notwithstanding the barriers to economic integration, Asean businesses are eager to connect with each other. She foresees these barriers to be eventually relaxed, albeit at a slow pace. In short, Asean integration will become the “new normal” in our midst.
In the words of Ms. Coson, “integration within the region is a natural progression of commerce, and a very crucial one.”
The misgivings about the economic integration notwithstanding, Ms. Coson says that it will be beneficial. For starters, it will provide an integrated consumer base of over 600 million potential customers, which will mean a much larger market for Asean businesses. In addition, bringing down the costs of the transfer of goods and people intra-regionally will truly open up the regional market, encouraging the proliferation of business in the region.
According to her, “this positively affects not only intra-region business travelers and tourists; it allows greater integration between companies which operate within the region, and abroad. All of this, in turn, stimulates global trade and makes production and the division of labor more efficient.”
Indeed, as 2015 draws nearer, the atmosphere ranges from near panic to optimism. The question is asked: Is the Philippines ready? What must Philippine businesses do in order to better prepare themselves for this inevitable development?
Ms. Coson’s answer could be culled from what she said the Asean economic integration means to the SM group of companies. She said: “We need to have a change of mindset and be more forward-looking and increase our level of competitiveness.”
“We need to think ‘regional.’ AEC integration means a market base of 600 million consumers that will support future growth. The free flow of people and goods reveals a bigger market, even in the domestic front with more investments interest and tourist-driven business.”
“We need to further scale up our banking operations to a comparable regional scale. All the three top banks are not yet regional size.”
“We need to factor in the effect of Asean market integration into our business decisions.”
Indeed, the right attitude for the Philippine business sector is to embrace Asean economic integration. It should not be in denial; on the contrary, it should decisively prepare for it. Our businessmen must change mind-set and aggressively strive to become more competitive. Our businessmen must remain firm in their belief that they can compete with other businesses in the Asean region.
As Ms. Coson succinctly summarized it, Asean integration is a “game changer” for Philippine businesses. Stiff competition from other Asean businesses is staring us in the face. We cannot afford to sit idly by as competition becomes more pronounced and other economies ride high on this endeavor. We need to adopt bold and sustainable steps that stand head and shoulders above other Asean economies.
The time to act is here and now.
(The author is the co-managing partner and head of the corporate and special projects department of the Angara Abello Concepcion & Regala Law Offices (Accralaw). The views in this column are, however, solely the author’s and should not in any way be attributed to Accralaw. The author may be contacted through francis.ed.lim@gmail.com.)