Asean integration is not a ‘doomsday scenario’

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Thursday, February 20, 2014


MOST of those who worry about economic integration of the 10-member Association of Southeast Asian Nations (Asean) fear that free flow of goods from neighboring countries will kill local producers and manufacturers.

Unknown to most, this has been happening since 2010 yet, the Department of Trade and Industry said.

Trade Secretary Gregory Domingo, the keynote speaker in yesterday’s Sun.Star Economic Forum, said this is the most common concern and yet not many know that 99.65 percent of goods traded from the Asean region are already tariff-free and have been since January of 2010.

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The forum, organized in partnership with SGV and Co., tackled the challenges and opportunities that come with the Asean Economic Community (AEC), which takes effect on Dec. 31, 2015.

Domingo pointed out that only a few products, mostly in agriculture, are being protected by tariffs. These are rice, sugar, livestock and poultry.

“As far as trade in goods, all of you are competing with Asean products at zero tariffs,” he told participants.

Liberalized

As for the trade in services, 80 of the targeted 128 sectors are already liberalized.

“We are already competing with our neighbors in services,” he said.

The AEC aims to create a single market and production base for the region, which means free trade in goods and services and free flow of skilled labor and investments within Asean.

With most goods already being traded freely around Asean, Domingo said that when the expected date comes, there will be no drastic changes to the business environment.

“It is not really going to be a doomsday scenario. The Asean way is we try to do things in increments. It will not be a big bang scenario,” he explained.

Domingo said that what needs work is completing policy that would enable a more free flow of skilled labor and investments, which are currently in negotiations.

Mindset

For economist Cielito Habito, too many worry about the integration “unduly and needlessly.”

“There is a need to have a change in mindset. Asean is not they or them Asean is we or us,” he said.

Habito, former economic planning secretary and currently chief of party of USAID’s trade-related assistance for development project, said most businesses, especially the smaller ones, need to be open to cooperating with their competition.

He explained that with a larger market to serve, large volumes are required. Smaller scale enterprises will struggle to comply with demands. However, he said that if smaller enterprises agree to work together to meet the higher demands, everybody benefits.

Small and medium enterprises (SMEs), he said, should shun the “kanya-kanya” or individualistic attitude and embrace the government’s clustering efforts.

He pointed out that even around the world, the trading patterns have changed. “More trade happens within industries. They are helping one another,” he said.

Product

He noted that not one product is solely made in one country, as its components or materials come from other countries.

Brands like Boeing planes and Apple electronics, he said, should be labeled “made in the world,” rather than just “made in USA” or “made in China.”

Habito believes the benefits of integration outweigh the costs, although some will benefit more than others.

To create a win-win situation, he said those who benefit from the integration should assist those who lose. He also said special attention should be given to the SMEs, such as support systems that would improve their productivity.

The benefits include stronger cohesion and lower unit costs that come with larger outputs and more sharing of technology. He believes integration will lead to higher productivity and higher incomes and stronger interdependence, which meets the original goal of creating “greater regional cohesion, peace and harmony.”

Reforms

Another benefit he cited is that the AEC “forces” the government to implement reforms that should have been done long ago but was unable to due to fierce opposition from some sectors.

These include the reduction of trade tariffs, barriers to investment, the open skies policy, improvements in trade facilitation and adopting strong policies on competition. He noted that most of the commitments in the AEC blueprint have largely been complied with.

He said Cebu is in the best position to tap the opportunities available under the AEC, as it is already a vibrant economy and is export-oriented. He added that Cebu is no stranger to value chains, as many of its products source materials from other parts of the country. It is also well-connected to other countries around Asean.

Asean Business Advisory Council SME representative Jay Yuvallos agreed with Habito and urged enterprises to embrace integration, rather than see it as a threat.

He recommends that companies make an Asean branding strategy to better understand the bigger market. He also urged the government to build more common service facilities so that SMEs can take full advantage to improve their packaging, testing and other processes.

Intervention

Cebu Chamber of Commerce and Industry president Lito Maderazo, on the other hand, asked for more government intervention in providing a better environment for business.

Mandaue Chamber of Commerce and Industry president Phillip Tan sought more reforms in customs processes, infrastructure and government policies.

But Cebu Business Club president Gordon Alan Joseph expressed disappointment in Domingo’s speech, saying most of these were well-known while there is much more that needs to be done.

Domingo was not able to respond because he left soon after his speech.

During his speech, though, he assured that the Department of Trade and Industry is formulating industry roadmaps for 20 sectors in coordination with the private sector and has undertaken efforts to fix tariffs distortions to make sure raw materials being imported are not priced higher than the finished products.

They are also trying to reduce tariffs on capital equipment.

Jesus Garcia Jr., chairman of the Sun.Star Media Group, said the Sun.Star Economic Forum was designed to help Cebu businesses plan ahead by providing the needed data specific to Cebu. SGV chairman Cirilo Noel, on the other hand, said the forum served as a venue to strengthen information dissemination on the AEC.

Published in the Sun.Star Cebu newspaper on February 20, 2014.

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