Philippines seen ‘on track’ with Asean integration

The Philippines is on track with efforts to integrate its economy with those of the other member-nations of the Association of Southeast Asian Nations, but it must prepare for tighter competition in trade and finance starting 2015, experts said at the Punongbayan & Araullo CEO Business Forum in Makati City.

Although the Philippines’ compliance with integration targets through policies and tariff rules slowed to 74 percent in the 2010 to 2011 review period from 94.55 percent in 2008 to 2009, the country is still “on track” and can play a key role in seamless regional trade, travel and banking, Asean Deputy Secretary General Dr. Lim Hong Hin said Tuesday in a speech.

“In the past, the Philippines has been considered as one of the developmentally challenged economies in Asia and it’s good that we are seeing a change in perception and the Philippine government is right on track in introducing the right policy and to go through the process to make sure that whatever policy gets introduced, the key beneficiary is the private sector and the people,” Hin said.

Some sectors such as agriculture and banking could also be hard-hit unless competitiveness improves, not only at the company level but also by industry and by regional clusters, executives said.

Fastfood giant Jollibee, for example, sees regional expansion and job creation but also increased importation when tariffs get wiped out from 2015 onwards, said Jollibee Foods Corp. (JFC) Chief Financial Officer Ysmael Baysa.

The finance sector is vulnerable, too, said BDO Unibank Inc. president Nestor Tan. Unless local banks build more strength in the SME [small and medium enterprise] and other segments where they already have an edge, they may be hurt by regional integration harder than they expect, Tan said.

Some investors see a two- to three-year window of opportunity to boom amid seamless trade and travel in Asean, while some say it could be as short as one year for individual companies in fiercely competitive sectors, according to the Department of Trade and Industry.

However, major constraints in keeping commitments are constitutional restrictions in terms of foreign ownership in companies and public utilities, DTI Undersecretary Adrian Cristobal Jr. said. In transportation, he said, the sticky issue is fifth-freedom rights, wherein an airline can pick up passengers in a third destination. Among many efforts, DTI is conducting road shows to keep firms abreast of what Asean integration is about and how it could affect their business, he said.

In a survey conducted during the forum, most of the corporate executives (81 percent) in attendance saw Asean integration as an opportunity. Only 16 percent saw it as a threat and just three percent were unsure of its effect on their respective firms.

A concrete example of the pros and cons of seamless trade and travel can be gleaned from Jollibee’s experience, which has been preparing for international expansion for the past seven years.

As the Philippines’ biggest fast food works to be Asia’s largest food-service company and be among the 10 largest fast-food chains in the world, it is seen to take advantage of falling tariffs through increased importation of chicken, sugar, rice and other raw material requirements from other Asean countries like Vietnam and Thailand.

While this presents risks to domestic agriculture, it does open up more regional job opportunities for Filipino employees, especially highly skilled, English-speaking and well-trained executives due to freer movement of natural citizens under Asean integration.