Making ASEAN our neighborhood and our business

my Trade Tripper column in the 21-22 May 2016 issue of BusinessWorld:

The best thing we could do now really is to set our sights a little bit closer to home. And our home is in ASEAN.

At the outset, let me explain that there is a difference between our government entering into further trade agreements without adjustment on the capacity of the bureaucracy (and by extension, the private sector) and private sector initiative to take advantage of already opened markets.

The latter is what we should be doing.

Most of our population isn’t even aware of the developments in ASEAN, much less their overall significance. So enmeshed are we with domestic politics that we fail to give proper focus to a region that forges on regardless of what happens in the Philippines internally but definitely significant impact the lives of its citizens.

ASEAN constitutes almost 20% of our trade: with exports at least $9 billion, while imports around $15 billion. The trade deficit of $6 billion should be seen as an opportunity for the Philippines and not a minus for ASEAN. Thirty-five percent of our ASEAN trade is interestingly with Singapore, a country of minimal resources but maximum talent.

As I’ve said before, trade may be perceived as global but geography is still paramount. Around 60% of our total trade is with Asian countries, with Japan and China leading the pack.

Competition from the other ASEAN countries shouldn’t even make Filipinos hesitate. ASEAN products have not obliterated Philippine business. And this is so even though tariffs for almost all products (except sugar and rice) have been down to nothing, true even way before the touted 2015 ASEAN integration.

If ever there’s a hurdle that needs to be overcome is the need to diversify Philippine product offerings.

If one looks at the top products traded within ASEAN, they consist almost of the same products that the Philippines primarily offers: mineral fuels and oils, electrical machinery, sound and television equipment, precious metals and jewelry; rubber and plastics; and chemicals.

Aside from foreign direct investment, tourism is positively one area for improvement, considering that the top five country visitors to the Philippines (i.e., South Korea, US, China, Japan, Australia), none are from ASEAN. Singapore comes in at 8th and Malaysia at 10th.

Another significant hurdle deals essentially with mind-set: that we do not consider ASEAN as “domestic.”

By this, I mean that we have not imbibed the thinking that ASEAN is our neighborhood, that we are part of this community.

This should change.

In terms of job opportunities, our co-ASEAN members should open doors for Filipinos. Consider that Singapore’s jobless rate is at less than 2%. Malaysia’s at around 3.4%, with a poverty rating of less than 1%. Indonesian unemployment is less than 6%, with poverty 11.3%. Even Vietnam registered unemployment of less than 2.5%, with poverty at above or high 12%.

The point is that the Filipinos, confronted with an unemployment rate of around 6.5%, (SWS surveys peg it somewhat at 22%) and poverty above 25%, could certainly do with a little bit more opportunities and those opportunities perhaps lie with ASEAN.

Furthermore, there is also the matter of taxes, with the income tax regimes generally amongst other ASEAN countries certainly more desirable now than that of the Philippines.

So with regard to Filipino employment, particularly with a population whose average age is around 23-years old, ASEAN could be key.

Most people look to Central Asia, Europe, or the US for work when ASEAN has an array of Mutual Recognition Agreements for licensed physicians, dentists, nurses, architects, engineers, accountants, surveyors, and tourism professionals that pass certain conditions.

With their talent, creativity, and training, comparative advantage of Filipinos seemingly lead to skilled or managerial positions, rather than the unskilled (of which there is an abundant competition right now admittedly from other ASEAN countries).

And quite excitingly, the opportunities don’t end with ASEAN but actually could be said to begin with it.

ASEAN already has free trade agreements with South Korea, Japan, Australia, New Zealand, China, and India. Combined, ASEAN and its trading partners offer Filipino products and services a market the size of almost half of the world’s population.

The trick though is not to think in terms of capturing the market singularly but rather in recognizing that international trade patterns have changed, and that Filipino companies have greater chances of slipping in the production chain rather than being the primary manufacturer of a finished product.

For Filipino companies in a position to be that kind of manufacturer, then a familiarity with ASEAN’s various offerings should allow for a more diverse sourcing of raw materials and talent.

It would definitely benefit Filipinos to learn more about ASEAN, the provisions and intricacies of the various agreements surrounding it, as well as the differing political and legal systems of each of the members.

Indeed, it is ironic that Filipinos pride themselves in being cosmopolitan yet are quite unfamiliar with the possibilities in their very own neighborhood.