Is the country ready for AEC? (Part 2)

According to IDEA’s latest copy of Economic Monitor, a regular publication of the Institute for Development and Econometric Analysis, Inc. (IDEA) there is only a mere two-year period before the ASEAN Economic Community (AEC) is launched. As a member of ASEAN, the Philippines is expected to be prepared for the said integration. Unfortunately, very little is heard from the Philippine government and the populace in general, regarding the efforts to meet the AEC 2015 launch. As time grows short, there is but one question that persists in the Filipinos’ minds: is the Philippines ready for the ASEAN Economic Community in 2015?

As per IDEA, in a 2013 study by the Philippine Institute for Development Studies, the progress of the Philippines thus far in implementing the AEC Blueprint is outlined, together with its score for the AEC Scorecard. For Phase I, the Philippines obtained an implementation rate equal to 95 percent, which translates to implementing 104 out of the 110 measures needed for Phase I. As for Phase II, the Philippines obtained an implementation rate of 73 percent, or 96 out of 131 necessary measures. For both phases, the country is lagging in implementing measures from the first pillar (single market and production base). While the Philippines seems to be committed to meeting the AEC launch and executing the AEC Blueprint, many have pointed out that the country may be far from ready for the 2015 integration.

Per same published report, the past year has proven to be a good one for the Philippines, as it experienced a robust 6.8-percent growth. In fact, the country continues to perform splendidly, with a 7.5-percent gross domestic product growth in the second quarter. With such a feat of growth, it is easy to think that the country would be more than ready to take on the 2015 economic integration. However, businesses and business owners seem to be wary of such a thought.

Introducing new avenues for trade are very important, since this would widen the market for the country’s products. However, since the Philippines is not actively trading with most of the countries in ASEAN, the integration may prove to be more of a threat rather than an opportunity. This is particularly true for small and medium enterprises, since they have limited access to financing, knowledge, skills, and technology.

Apart from this scenario, there is the country’s need for additional investments. While the country seems to be attracting more investors, there is still the issue of below-par foreign direct investments (FDI). This can be partly attributed to the foreign investment cap set forth in the constitution. Such a cap would ensure that businesses in the Philippines are predominantly Filipino-owned; however, the cap, coupled with the lack of action to amend it, sends the wrong message: that the Philippines is not yet entirely open for foreign investments.

Infrastructure is also key to the integration. In order to meet the free trade goal, goods and services have to be delivered efficiently, and this can be done through efficient road networks, transport systems, and power sources. Unfortunately, the Philippines suffers from poor infrastructure and several delayed implementation of projects, particularly those under the Public-Private Partnership according to the researchers of IDEA (to be continued).

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