Complacency could cost Phl firms

CEBU, Philippines - Despite calls for the preparation of the upcoming Asean integration in 2015, most companies in the Philippines have yet to start their moves in protecting their businesses for the expected threat of much higher competition in the zero-tariff regional community.

Hans Sicat, president of the Philippine Stock Exchange (PSE), observed that amid high awareness of the Asean Economic Community (AEC), only very few companies in the Philippines have started to position themselves and put up strong presence in the key markets within the region.

“I don't think everybody has really figured out what [Asean integration] really means,” said Sicat, adding that awareness in terms of action is not yet visible among companies here.

Sicat made mention of the Universal Robina Corporation's (URC) move to anticipate the effect of AEC in their business, making sure to extend presence in the different Asean countries.

According to Sicat, companies like URC should be made an example of making their way ahead of the curve in order to take advantage of the 600 million consumer base within the Asean market.

As early as now, Sicat said companies should already make their presence in the Asean region to take advantage of the positive benefits brought about by the integration, otherwise, those that will stay complacent might be left out by the much stronger competition.

Earlier, the Cebu retail players announced their preparations on strengthening hold in the Philippine market in preparation for the borderless Asean market.

Cebu retailers have recognized that they have no choice but to strengthen their grip on the local market and protect their turf, so as not to be swallowed by the international brands that are starting to enter the Philippines and to prepare themselves for the 2015 integration.

Meanwhile, the Cebu business sector is calling the government to intensify its information drive on the country’s preparedness for the integration.

Cebu Business Club (CBC) President Gordon Alan “Dondi” Joseph said most businesses, specifically the small and medium enterprises (SMEs), do not really have an idea what they are going to benefit or lose in this regional market integration three years from now.

“I don't think Cebu is prepared for the Asean integration. Some do not even understand its impact to their respective businesses,” said Joseph.

With this he said the government and private sector should work together in drawing plans and strategies on how to benefit from the Asean integration, and at the same time prepare the small players, especially those that will be affected by the zero-tariff implementation.

The implementation of ASEAN Free Trade Area (AFTA) will provide negative impact to some other sectors of the economy in the Philippines, like the local manufacturing companies and the farmers.

With the zero tariff rule, the agriculture sector is being threatened as agricultural goods produced from other Asean countries with high technology adoption, will be made available in the Philippine market in much cheaper prices.

“We should start working on the preparation right now and work fast,” said Joseph.

Meanwhile, Department of Trade and Industry (DTI) Undersecretary Adrian S. Cristobal Jr. said that as the Philippines is moving into a “sweet spot” as an investment destination and trading partner, the government has set up a good plan to strengthen its involvement in the regional economic integration.

He said that over the last decade, Asean has become increasingly an integrated production network centered on China and Japan.

The most prominent feature of this production network is that most of the goods traded are intermediate goods, meaning parts and components, rather than final goods.

“The Philippines is very much a part of this production network. The electronics industry is a case in point,” Cristobal said.

This development, he said, is result of business strategy, where production process, such as for making an automobile or a computer, “is split into different steps and each production step is undertaken in different locations across national boundaries.”

Trade activities such as this have been one of the driving forces behind increased trade integration in Asean +3.

According to Cristobal, foreign direct investments (FDIs) have played an important role in the formation of this production network in ASEAN +3 countries.

Multinational companies mostly Japanese and Chinese used FDIs as mechanism to facilitate trade in parts and components in countries where they operate.

The prevalence of FDI-based production networks has led to rapid increase of FDI inflows among Asean +3 countries over the years, as well as the greater expansion of exports and imports of intermediate goods of members of these networks. /JMD (FREEMAN)