The Philippines with an ASEAN backyard

was my Trade Tripper column in the past weekend issue of BusinessWorld:

(The following are excerpts from my talk “The Philippines in the ASEAN Economic Community,” given during the Brown Bag Seminar hosted by the Embassy of the Republic of Korea, Feb. 24.)

ONE THING that policy makers and citizens really need to be reminded of is the concept of “adverse selection.” This refers -- roughly -- to a situation where a wrong decision is made due to the asymmetric information or even possession of wrong information by the parties.

In the context of ASEAN, the thinking seems to be that its integration this year would bring economic benefits that the country has long hoped for. But that is not consistent with reality. ASEAN brings opportunities. But that’s all it does. And thus the challenges.

Or to put it in even blunter terms, what is the point of opened markets if we don’t have the capacity to satisfy those markets? And what is the point of opening up the country for investments if the environment does not make it attractive for investors?

We are nearly last in terms of ease of doing business compared with other ASEAN countries; our power, transport, productivity, and infrastructure are nothing to brag about; and despite alleged improvements in relation to competitiveness, the rule of law and protection of property are a concern in most major studies. Then there is traffic.

Our exports also need work: our 2013 export numbers, for example, show a mere US$54 million paltry compared with Vietnam’s (US$129), Indonesia’s (US$199), Thailand’s (US$229), and Malaysia’s (US$230.7). For FDIs, the Philippines is celebrating its 3.86 (in billions US$) showing in 2013, even though the same is spectacularly short of Vietnam’s (8.9), Malaysia’s (12.3), Thailand’s (13), Indonesia’s (18), and Singapore’s (60.6).

Furthermore, most citizens are not even aware of the developments in ASEAN and that, sooner or later, a decision would have to be made on the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership.

The Philippines has been so enmeshed with its domestic political developments that it failed to give proper focus to international economic developments that forge on regardless of what happens domestically and definitely have a significant impact on the lives of its citizens.

But perhaps that is the key to the problem. That many Filipinos (like many in the region) have not considered ASEAN as “domestic.” By this, I mean that we have not imbibed the mindset that ASEAN is our backyard, in the manner that Cebu or Davao is part of our neighborhood. In short, ASEAN is treated as foreign, far away, distant. This should change.

Almost 81% of our trade is with APEC, with ASEAN accounting for 20%. So while international trade, as we have been told, is global, geographic and historical realities nevertheless remain to be relevant.

And yet, technology and transportation developments have made it so that even the humblest of our citizens can engage within this setting. That they are unable to do so is not because of their lack of capacity or opportunity but because of the lack of information, which then leads to a lack of confidence.

Even in my own profession, which is law, there are many lawyers who still see international law as “foreign.” This despite the fact that our country, from its very inception, has always considered international law to be part of the laws of the land.

Government and policymakers (as well as media) have to encourage the mindset that these things are available, are within reach, and provide opportunities. This means having a professed international outlook paralleled by a pragmatic business orientation and competence.

Now, not to give cross-signals, we also have to point out the complexities involved in an ASEAN that encourages regional trading arrangements. Considering that local businessmen have continuously raised concerns regarding the Philippines’ capacity to keep up with its multilateral trading commitments, the increasing number of FTAs lead to a complexity that can be seen on the surface alone: the rules of origin, dispute settlement jurisdictions, non-tariff subjects such as market access and trade facilitation, sanitary and phytosanitary measures, technical barriers to trade, and (as always) the issue of smuggling. And the foregoing doesn’t even approximate the intricate effects that global finance has on trade.

My view on this has always been that the more technical and complicated a subject, the more important that someone has a generalized training that can match the complexity.

Others would go the different route: if a thing is complex, then hire specialists. But that doesn’t work for me for two reasons: hiring specialists to work on international trade will limit the nature of the analysis. It will also narrow the perspective for the recipient of the analysis, focusing on technicalities rather than on what’s really important.

Bottom line, the more complicated the environment is, get policymakers or analysts (even lawyers) with a truly well developed liberal education. They will have more analytical skills and appreciation for truth.