I often say that I welcome how the Asean Economic Community (AEC) has been leading us to do the right things. That is, the AEC forces on us the discipline of going beyond palliative measures and doing fundamental reforms that we ought to have done long ago, if not for their political unpalatability. Unfortunately, populist politics and bad governance have been the foremost impediments to this country’s inclusive growth and development. For as long as we allow our leaders to make policy decisions driven by self-serving political considerations rather than the good of the greatest number, we will keep falling behind as we watch erstwhile weaker neighbors pass us by.
Fortunately, regional visions and policy directions are mostly set by people with the right motivations acting collectively and collegially, thus negating the likelihood that self-serving politics would govern the directions they set and the decisions they make. Asean leaders saw it fit to commit to an AEC Blueprint that embodies over 400 concrete actions that we are to pursue individually and collectively to achieve the vision. Most of the committed actions have been done, and while many see 100-percent achievement by end-2015 as unlikely, the AEC would be largely in place by then, as it is in fact largely in place even now.
What are the “right things” that the AEC has forced or is finally forcing us to do? Freeing up trade in goods with our neighbors is more than 99 percent done—since four years ago in fact.
Actions we have yet to do but are obliged to complete by next year are long-needed measures with truly broad benefits such as more open skies, trade facilitation via improved customs and regulatory procedures, opening key services sectors to greater foreign ownership, and a strong competition policy, among other things. Why do I believe that these are indeed “the right things” to do?
We’ve already been reaping the benefits of lowering barriers to trade, best seen in how prices that Filipinos pay for the goods they consume have been so much more stable than they had historically been. Before, insulating our own market from the wider global market made the prices we face easily subject to domestic shocks. In the 1990s, 7-percent inflation was considered an aggressive target, as we had endured double-digit inflation rates in the wake of major disasters, both manmade (repeated coup attempts) and natural (earthquake, Mt. Pinatubo eruption), that plagued the Cory Aquino administration. With last year’s average inflation rate of only 2.8 percent, most of us probably fail to realize that greater openness to the world market has much to do with the greater price stability we now enjoy and take for granted, not to mention the wider choices that consumers now face.
Among the actions we have yet to deliver is the ratification of the Multilateral Agreement on Air Services, which would have us follow our neighbors in allowing greater access by foreign airlines. This has always made eminent sense given how it would allow us to draw in many more foreign tourists, thereby creating jobs for millions of Filipinos who need them. For the last seven years, government has justified our inaction with the excuse that our main airport and tourism facilities are not ready to cope with much increased passenger traffic and tourist visits. Yet we have done little, if anything, to address the inadequacy through all that time. With the AEC looming, I trust that we will finally get moving to unleash the sector’s great job-creation potential that we have suppressed for too long.
Our manufacturers have long lamented the tedious and costly processes they must go through in the course of importing capital goods, raw materials and other inputs vital to their production process, or in exporting their products overseas. The cumbersomeness of the process drives many to smuggling or paying off corrupt officials to facilitate their shipments, even as import tariffs are already low enough to be paid legitimately (mostly zero for Asean goods, in fact)—if only trade transaction processes in Customs and other trade regulatory agencies were streamlined and made easy for traders. The AEC, along with the World Trade Organization’s new Trade Facilitation Agreement, is pushing us into adopting trade facilitation measures that would lower the costs of doing business and thereby make Filipino producers more cost competitive.
Some of the more challenging measures the AEC obliges us to undertake run against our constitutional limitations. These include the commitment to open key services industries like financial, transport, business and professional services to foreign ownership up to 70 percent. And yet these industries tend to be controlled by a few dominant players in a market that cannot be contested by potential rivals from outside. We consumers stand at the losing end, left to contend with higher prices and lower quality (note, for example, the recent news about the Philippines having the slowest Internet among our neighbors). It’s time to revisit our constitutional limitations that are a real obstacle to having a less concentrated economy, hence more inclusive growth and development—and the AEC may yet force us to do it. Also in support of this outcome is the agreed AEC commitment to enact a competition law and set up an independent competition authority. Our lawmakers must finally enact this long-pending legislation snagged in our Congress for many years—blocked, of course, by the very vested interests determined to maintain market dominance.
If among the blessings our AEC membership brings us is the political will to set our policies right, then I’m all for it.
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E-mail: cielito.habito@gmail.com