Potent challenge
In the business centers of Jakarta, Singapore, Kuala Lumpur and Bangkok, there is a palpable excitement about the looming economic integration of the region in 2015.
In the Association of Southeast Asian Nations, some of the most forward-thinking businessmen are economists looking ahead and planning for the time when 10 countries will fuse into a single market of 500 million consumers.
That air of anticipation, however, is somehow not as keenly felt in the Philippines, whether by big businessmen or small entrepreneurs. For the most part, local commerce seems to be unaware of the economic tsunami that is about to hit local shores in less than two years.
But if the government is to be believed, there is nothing to be worried about as far as the 2015 economic integration of Southeast Asia is concerned. After all, the bulk of the changes—especially the reduction in tariffs between nations—already came into play in January 2010, the Department of Trade and Industry often says.
As the DTI is wont to point out, 99 percent of tariffs among the 10 members of the Asean were already reduced to zero three years ago. If local businesses survived that, they can survive the next wave that is coming.
But some leaders of Philippine business tell a different story. They are worried enough to know that the country is inadequately prepared to face the tidal wave of competition heading to our shores. In particular, the Philippine Chamber of Commerce and Industry has been furiously waving the red flag in recent months, warning of dire consequences to local companies if key issues are left unaddressed by government as the 2015 deadline approaches.
Take the country’s agriculture sector, for example, especially the highly political business of rice farming. While the famed Thai rice was bred in Los Baños, Laguna, everyone knows that Filipino rice farmers have failed to advance over the years in terms of production efficiency as their peers in Thailand or Vietnam.
Imagine then the impact on the local rice farmers of wave after wave of rice from Thailand or Vietnam landing at our ports, produced through more efficient farming methods and, thus, sold at cheaper prices. Replicate this scenario across the entire Philippine agricultural
sector—one of the largest generators of employment—and the devastation would easily spread to the rest of the local economy.
Never mind the country’s largest corporations, many of which have the resources to compete toe to toe with the rest of the region.
But problematic scenarios can also be painted for small and medium enterprises, which make up the bulk of registered businesses and employ millions for Filipinos.
According to the PCCI, many are unprepared for the deluge of foreign brands and goods and services that are set to compete with them on their home turf when integration happens.
Is the Philippines prepared for this? The answer is no, and the weaknesses in the system, sadly, can be laid directly at the doorsteps of government. In particular, the state needs to do more—a lot more—to address the high costs of electricity and logistics, and the lack of adequate transportation and infrastructure.
These elements are key in ensuring that the Filipino entrepreneur will not have to contend with foreign competitors with one hand tied behind their back.
Of course, there is no way for the country to back away from our international economic commitments. Moreover, the threat of competition has historically been one of the most potent ways to prod poorly performing sectors into boosting their productivity.
The Philippines should then take the creation of the Asean Economic Community in 2015 as a challenge to improve competitiveness across the board. There will be winners and losers. Some industries will adapt and thrive; some will fail and fall by the wayside. But the government has a responsibility to the Filipino people to create an environment that will allow entrepreneurs to rise or fall on their own merit, instead of being hobbled by state-abetted structural weaknesses from the get-go.
Filipino entrepreneurs are not asking for much. They just want the government to do its job.
