AEC: Do we belong?
The just concluded 69th Annual National Convention of the Philippine Institute of Certified Public Accountants served as an eye opener for most of us. Three topics were very timely and appropriate as these dealt with the Association of Southeast Asian Nations integration and the creation of the ASEAN Economic Community. With three international speakers (an Indonesian and two Europeans) and a Cebuano member of the ASEAN’s business advisory council on hand to stress some significant points of globalization, the sense of urgency has heightened a bit.
Indeed, transforming the into one ASEAN Economic Community by the end of year 2015 is imminent. It simply means freer trade of both goods and services among the ASEAN countries. Consequently, we shall be among an economic market of about 600 million people or about 8 percent of the global population. This will be an aggrupation of countries whose size can possibly leverage against first world countries and some dominant countries or other unions of countries like China and the European Union, respectively.
However, though the very essence of the integration is cooperation, which necessitates that member countries complement each other, competition within is still inevitable. In preparing for it, countries like Singapore will have approaches totally different from ours. Undoubtedly though, each country’s ability to strengthen their micro and small enterprises, generate foreign direct investments (FDIs), and lure tourism industry players will be brought to fore.
Strengthening micro and small enterprises could be tough. As we all know, most of our micro and small enterprises would prefer to go underground for one reason or another (probably, to evade taxes, among others). However, such business model, though proponents give more emphasis in saving taxes, resulted to a host of many other concerns. For instance, due to their preference to go underground, there are no valid evidences (Taxpayer’s Identification Number, income tax returns, business permits, etc.) of their existence. Consequently, they remain non-bankable. Thus, they usually fail to attract capital to fund projects. Moreover, as branding is the name of the game right now, they fail to cash in on name recall, thus, threatening sustainability.
As far as these FDIs and tourism initiatives are concerned, it would seem an uphill climb too. For one, in the ASEAN right now, Singapore is cornering the biggest chunk of FDIs. Secondly, our government’s unbending stance as far as amending some economic provisions of the constitution as well as the removal of some restrictions in the Foreign Investments Negative List have made us the least preferred destination of FDIs. Consequently, we are among the laggards in the ASEAN in this respect. Historical data will help us sort this out. As reported by the World Bank through the East Asia Pacific Economic Update earlier this year, the ASEAN region, has been the largest recipient of FDIs, in Asia Pacific. However, since 1952 until 2012, “Singapore accounts for more than half of total FDIs to the whole region at 52percent. Thailand ranks 2nd with 13percent, followed closely by Indonesia at 3rd with 11percent, at 4th is Malaysia with 10percent, Viet Nam (the once war-torn country) ranks 5th with 8percent, and the Philippines is 6th with a miserable 3percent.”
Though, in absolute amount, we increased our FDIs this year when compared against last year, still, among foreign investors in the ASEAN, we are least likely chosen. We continued to be among the least preferred countries in the ASEAN in terms of FDIs. The fact is, weighed against that of other key countries in the ASEAN, ours will still pale in comparison. Take 2013 for instance. We were billions of dollars away from our Southeast Asian neighbors. With just US$3.859 billion in net FDI inflow, we were among the laggards at a consistently disappointing 6th place. Singapore, Indonesia, Thailand, Malaysia and Viet Nam grabbed US$60.645 billion, US$18.444 billion, US$13.000 billion, US$12.297 billion, and US$8.900 billion, respectively.
Some may argue though that tourism can be a good lead. However, the fact remains that in the ASEAN, Malaysia has consistently grab a lion share of the tourism pie. Our non-readiness was underpinned in a report in 2012 by the World Economic Forum’s Travel and Tourism Competitiveness Index which ranks 139 economies. In such report, we were ranked 94th. Way ahead of us are our ASEAN neighbors Malaysia, Singapore, Thailand, Brunei, Indonesia, and Viet Nam. Why? Because of the lack of tourism-related infrastructure. Yes, it may seem that we are good at this because we’ve got a handful of well attended festivals. Well, it’s a given, almost all local government units annually hold festivals. However, these LGUs have reaped, so far, only a day’s or, at the most, a week’s bounty each year.
Therefore, do we belong in the ASEAN Economic Community? Yes, territorially. However, not among the first five countries but among the second stringers or benchwarmers.
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