ASEAN Integration and Its Effect on

Economic Sovereignty

By:

De Guzman, Mageryl Shay B.

Lacasandile, Regine Anne

Labiaga, Janzieri

Lopez, Ivy

Narag, Janro

Solda, Ace Aries

Table of Contents

INTRODUCTION......................................................................................................................................3

ASEAN ECONOMIC COMMUNITY.......................................................................................................4

Is the Philippines ready for ASEAN Integration?.....................................................................5

Economic Sovereignty of the Philippines.....................................................................................9

CONSTITUTIONAL RESTRICTIONS..................................................................................................13

CONSTITUTIONAL RESTRICTIONS IN RELATION TO THE ASEAN ECONOMIC BLUEPRINT.............................................................................................................................................16

Conclusion and Recommendations..............................................................................................18

The success of ASEAN regional integration will depend on how this affects the agricultural sector...........................................................................................................................19

The success of ASEAN regional integration will depend on how this affects the labor market and quality of life of women and men in the region................................20

The success of ASEAN regional integration will depend on the resolution of territorial disputes..........................................................................................................................21

Creating an economic community............................................................................................22

INTRODUCTION

The Association of Southeast Asian Nations (ASEAN) is an organisation

of Southeast Asian Nations. It was founded on 8 August 1967, with the

Philippines, Malaysia, Singapore, Indonesia, and Thailand as the founding

members. Brunei, Vietnam, Myanmar, Laos and Cambodia joined later. The

ASEAN Declaration1states that its purpose is to accelerate economic growth,

social progress, and cultural development in the region…to collaborate for

the better utilisation of agriculture and industry to raise the living standards

of the people… and to maintain close, beneficial co-operation with existing

international organisations with similar aims and purposes. In the past,

attempts have been made to create coalitions for this purpose. One

motivating factor was to counter-balance the growing influence of the United

States in the region.

The first attempt was in 1990. The East Asia Economic Caucus was

proposed by Malaysia, with ASEAN countries and Japan, Korea and China as

members. However, the plan was scrapped due to heavy opposition from the

United States and Japan.The Common Effective Preferential Tariff (CEPT) was

adopted. Its purpose was to phase out tariff for the end goal, which is to

increase the region's competitive advantage as a production base geared for

the world market. The CEPT paved the way to the ASEAN Free Trade Area2

(AFTA)—an agreement regarding local manufacturing in ASEAN countries.

By 2008, ASEAN members met in Jakarta to create an economic

community similar to the European Union. ASEAN would be the region’s

single trade entity. The leaders of the member states envision a common

market by the end of 2015. Aside from that, ASEAN envisions Southeast Asia

to be a region of equitable economic development, economically

competitive, and fully integrated into the world market.

To achieve these goals, the Philippines—and ASEAN countries—will

have to adapt to the changes, economy wise. Currencies for example, will no

1 Commonly known as the Bangkok Declaration. Signed by the founding members in Thailand.2 Signed in Singapore in January 1992.

longer vary from country to country. A single unit of money will be used,

much like the Euro utilised by the European Union. More than that, the

Philippines will have to adjust to the provisions of the ASEAN economic

entity. The current provisions of our laws—our very own Constitution—may

have edicts that run contrary to the ultimate economic goal of the region.

Given the changes that must be made, this paper sets out to answer

these questions:

1. Will the Philippines lose its economic sovereignty once it becomes a

member of the ASEAN economic entity?

2. What are the effects of the ASEAN integration to the Philippine

Constitution and other economic laws?

The writers of this paper believe that as good as the ASEAN integration

may be, the sovereignty of the Philippines as a state should not be

diminished or lost.

ASEAN ECONOMIC COMMUNITY

Unlike the EU, ASEAN has no history of pan-regional unity at any time

in the past. The ASEAN countries were never united under a common system

of government, law, language and religion as was the case with the Roman

Empire in Europe. The roots of the ASEAN grouping can be found in the

region’s opposition to Communism in the 1950s, which led to the formation

of the Southeast Asia Treat Organization (SEATO). The motivation for

increasing economic co-operation in the 1990s was the threat of competition

from China.

The ASEAN, one of the fastest growing regions in the world, consists of

10 countries at varying development levels—from the richest Singapore to

the poorest Myanmar. It offers a growing consumer market of 620 million. Its

gross domestic product is estimated at $2.3 trillion in 2012 and is expected

to grow to $3.8 trillion by 2017.

The ASEAN Leaders envisioned transforming the region into a stable,

prosperous and highly competitive region with equitable economic

development and reduced poverty and socio-economic disparities—the

ASEAN VISION 2020. They pledged to sustain the region’s high economic

performance by building upon the foundation of their existing cooperation

efforts and enhance mutual assistance. They also commit themselves to

moving towards closer cohesion and create a highly competitive ASEAN

Economic Region in which there is free flow of goods, services and

investments, a freer flow of capital, equitable economic development,

achieving global competitiveness.3

They have engaged towards the integration of the region into an

ASEAN Economic Community based on 4 economic pillars namely: Single

Market and Production base, Competitive Economic Region, Equitable

Economic Development, and Integration into the globalized economy.

Realistically speaking, ASEAN integration will be fraught with

difficulties. Since the rise of China and its increasing global share of trade

and FDI, each ASEAN member state has been vying for a larger share of the

pie within the region – particularly in the arenas of FDI and tourism. The

common culture and history that would facilitate greater regional co-

operation is simply absent.

Is the Philippines ready for ASEAN Integration?

Many questions have been raised concerning the Philippines’ readiness

to enter into the ASEAN Economic Community. The Philippines economic

growth might accelerate due to higher demand for local products in the

Asean market. The increased labor mobility in the Asean market might

provide more job opportunities for Filipinos, which might ease up the serious

3 http://www.asean.org/news/item/asean-vision-2020 [Retrieved: June 1, 2015]

unemployment at home and further increase OFW remittances. The

Philippines has an advantage which is the service sector because of its huge

supply of English-speaking workforce. At the same time, business firms

might be attracted to locate in the Philippines because of the big pool of

English-speaking labor supply. Greater Asean integration will result in easy

adaptation of cutting edge technology and best business practices, allowing

local firms to adapt to international standards. Realistically, Asean

integration is not going to be a walk in the park. Policy makers have to

address some real problems.

First, on the fiscal side, the government has to make the tax system in

sync with the rest of the region. Having the highest marginal personal

income tax rates and one of the highest corporate income tax rates in the

region is a major disincentive for local and foreign investors.

Second, the government has to address the Philippines’ notoriously

poor infrastructure, the high cost of doing business, and poor governance.

There have been some improvements, but the Philippines remains to be at

the bottom of the Asean-5 ranking. It has to find ways of reducing the costs

of power and, at the same time, making power supply more reliable. Tourism

has great potential. But in order to boost tourism, the country needs world-

class airports, seaports, highways and urban transit system. It needs more

hotels and facilities in select tourist destinations. In addition, the government

has to ensure the safety of tourists on their way to and from the tourist

destination and during their entire stay in the country.

Third, the government has to continue to invest in human capital — to

make sure that the growing labor force is healthy and is equipped with the

appropriate education and skills that can compete with the rest of the global

work force. As a corollary, given the social costs of overseas employment,

the government should strive to create more high-paying, decent jobs at

home.

Fourth, the government has to address the problems of the agriculture

sector. Sadly, the sector is not ready for Asean integration. The sector is not

competitive because of the limited arable land (thanks to land reform and its

mountainous terrain) and the poor public infrastructure to transport

agricultural products from the farm to the market. The sugar industry cannot

compete with Thailand. The rice industry cannot compete with Thailand and

Cambodia. The mining sector is barely surviving largely because of the lack

of clear mining policy. To say that we’re ready for the Asean economic

integration is like whistling in the dark. Asean integration is not going to

happen overnight, but the sooner our policy makers address the country’s

limitations — and there are many and hard — the better.4

The Department of Trade and Industry (DTI) has said that the

Philippines is "primed and ready" for the AEC, with DTI Undersecretary

Adrian Cristobal Jr. saying that the integration scheme would mean vast

opportunities for intra-ASEAN investments, dynamic competition as well as

complementation.

"Since 2010, most ASEAN goods have been traded in the region at zero

tariff, including products from the Philippines. A considerable number of our

local companies have since established their presence within ASEAN,

engaged in healthy competition with businesses located in the region,"

Cristobal said.

According to Cristobal, the private sector has been aggressive in

gearing up for competition and complementation, "To better serve a bigger

market outside the ASEAN and strengthen its market presence. The

government, on the other hand, is addressing non- tariff barriers so we can

benefit more from intra-ASEAN trade."

4 Is ASEAN ready for Economic Integration? Is the Philippines ready for it? Benjamin Diokno. March 2, 2015.

But Philippine businesses are saying a different thing. Standard &

Poor's also believed that banks in the Philippines were not yet prepared for

the tougher competition that would result from the integration of Southeast

Asian economies. In one of its latest publications, S&P said banks in the

country, although profitable and stable, have a much smaller business scale

compared with their counterparts in the region. The credit-rating firm said

that Philippine banks might find it difficult to preserve market share with the

free entry of foreign competition that would follow the regional integration.  

"We believe banks (in the Philippines) will have to walk a thin line to

preserve market share while pursuing profitable expansion as ASEAN 2015

draws closer," S&P said in the report titled "The Philippines' Banking System:

The Good, the Bad and the Ambivalent. " Even the Bangko Sentral ng

Pilipinas (BSP), the country's central bank, has been cautious in reacting to

the ASEAN integration scheme.  BSP Deputy Governor Diwa C. Guinigundo

cited that the 40-percent foreign ownership cap in the country is low

compared to the 99 percent in Indonesia. He also said there is "no hard limit"

to foreign ownership in Malaysia and in Singapore, and while there is a 50-

percent cap in Thailand, there is a "flexibility clause" that would allow foreign

ownership beyond 50 percent on a "case-by-case" basis. He said that the

total assets of all Philippines banks are only equivalent to one big bank in

Malaysia and that the combined assets of the three largest banks in the

country are only as big as one bank in Thailand.5

According to the National Economic and Development Authority

(NEDA), with the advent of the ASEAN Economic Community, the Philippine

labor market will ideally spur domestic jobs. This however is not automatic.

Unless structural and policy changes are implemented locally, high

unemployment and underemployment will persist. Moreover, the agency said

that Filipinos are strongly positioned to benefit from job opportunities of the

ASEAN Economic Community. But the Philippines has to do more in terms of

5 ASEAN economic integration in 2015 draws conflicting views in Phl. The Philippine Star. April 24, 2014

opening up to foreign investors and enabling an environment for fair

competition. Former Socioeconomic Planning Secretary Cielito Habito, who

is Chief of Party of the USAID Trade Related Assistance for Development,

said that one of the possible reasons why the share of jobless workers in the

Philippines is higher compared with other ASEAN countries is because our

neighbors are more open to foreign direct investments (FDI).

Habito noted that the Philippines is the only ASEAN country where the

constitution enshrines foreign investment restrictions in certain areas,

including public utilities, educational institutions, mass media and

advertising. The ASEAN Comprehensive Investment Agreement (ACIA) was

signed to liberalize intra-regional investments. However, the Philippines

listed 19 reservations or domestic measures that do not conform with some

of ACIA’s provisions. All 19 reservations cited the 1987 Constitution as

among the legal bases. Habito said that lifting or minimizing restrictions on

foreign investments and capital will likely improve the quality of our services

and workers.6

The shattering of neoliberal illusions has fostered the insight that the financial

markets – indeed, more generally, the functional systems of world society whose influence

permeates national boundaries – are giving rise to problems that individual states, or

coalitions of states, are no longer able to master... the international community of states

must develop into a cosmopolitan community of states and world citizens.

-Habermas

Economic Sovereignty of the Philippines

The ASEAN Integration has created contentment and unease in the

Philippines populace. It has opened a lot of inquiry as to the effects it would

6 Demystifying ASEAN Integration and the Philippine Labor Market. DevPulse, vol.13, no.1, 2014

have on our sovereignty due to the departure from the concept of

localization or Filipino-First Policy. Is there really a yielding of the Philippines’

Economic Sovereignty?

We must first see the factors which might lead to a diminution of the

constitutionally engraved and internationally guaranteed rights of state.

Economic Sovereignty is the ability of a state to control its own

economy in response to its own needs. This involves keeping its own

currency, trading with whom it chooses, controlling imports and exports, and

regulating its currency to protect against speculation, if necessary.

Membership of a single currency is incompatible with the principle of

economic sovereignty.7

Entering into the state of being one with all ASEAN nations is a huge

undertaking and requires consent of the participating states. It is voluntary

consent which is the operative fact, international institution derive their

power from the explicit consent of the contracting states8. Being a part of the

ASEAN requires that the representatives of the state concur on the

agreement and that it may either take two forms. The first is an irrevocable

agreement and the second is a revocable agreement.

The delegation of economic powers requires the consent of the

participating nations and it a critical point taken from the perspective of

economic sovereignty. While the line between revocable and irrevocable

delegation is not always clear, irrevocable delegation of power clearly

implicate sovereignty, whereas revocable delegations do not. Withdrawing of

consent through exit or renegotiation prove too costly but when consent to

7http://www.sovereignty.org.uk/features/articles/sevensov.html , last accessed June 2, 20158 1996 ICJ REP. 66, 79 para 25 (July 8)

an agreement is revocable and can in fact be withdrawn, by definition states

retain the ultimate power to decide and issue or determine a policy.9

By way of an example10, in the United States, the implementation of

the Clean Air Act is delegated, by way of statutory implementation, to the

congress, but in this instance no sovereignty was actually shifted towards

the National Government. In fact, the consent could be withdrawn at any

time.

Let us see current examples closely similar to the ASEAN Integration

and inspect the effects on sovereignty in a less strict sense. The closest

international agreement to the ASEAN Integration is the World Trade

Organization (WTO) which is the administrative body to the General

Agreement on Tariffs and Trade (GATT). There is a breach of sovereignty

when the contracting state to the treaty creates a process or rule which

generate decision that they cannot veto ex post. Point in fact is the rules on

dispute settlement in the WTO, wherein no veto of Appellate Body rulings is

allowed.11 The loss of the remedy of appeal is an erosion of sovereignty.

When these institution shift some measure of effective control over policy

away from the national Government, sovereignty is lost or compromised.12

The question now is will the same ceding of economic sovereignty

happen in the current ASEAN framework? Or is there really a relinquishing of

the economic sovereignty in the first place. It has been clear for a long time

that individuals by co-operating enhance not diminish their freedom of

action. Let us take the simplest example of all, a stop sign or traffic light. As

individuals we cannot drive as we wish without endangering the lives of

9 The Vienna Convention on the Law of Treaties limits exit to instances where it is explicitly allowed for in the treaty text or the intent of the parties implies that exit is permitted.10 A Clean Air Act Primer, Part 1, 22 ELR 10159, Garret and Winner11http://www.thirdworldtraveler.com/WTO_MAI/WTO_CAGE.html12 Rethinking the sovereignty debate in International Economic Law, KalRaustiala

others and vice versa. As such we pool decision making to avoid what

economists call spill-over effects, namely the consequences for the individual

of other peoples’ actions and likewise the consequences for them of that

person’s actions. As Vattel (1916) over a hundred years ago put it more

eloquently and in a more general context.

The end of the natural society established among men in general

is that they should mutually assist one another to advance their

own perfection and that of their condition; and Nations, too, since

they may be required as so many free persons living together in a

state of nature, are bound mutually to advance this human society.

And so as correctly noted by Vattel, it is with nations, unless we wish to

pursue a policy of total autarky, or self-sufficiency, in economic terms. But

even here we are not protected from the actions of other countries. We

cannot stop the wind blowing harmful particles across the Irish sea; we

cannot counteract the fact that rogue states, criminals, illegal immigrants

and terrorists do not respect national boundaries and hence that their

activity is international in nature; we cannot prevent the adverse

consequences of the actions of others generating global warming; and

without extreme restrictions on the freedoms of our own citizens we cannot

cut ourselves off from ‘interference’ via electronic means and satellites from

the ideas and influence of others outside our shores.13

Lowe has liberally interpreted sovereignty and gave it a wider latitude

for collaboration between states:

In most cases there will be little point in asking if a State is sovereign,

or if a particular act or situation is compatible with the sovereignty of

the State. The question will be... does this action or situation deprive

13 Shared Economic Sovereignty: Beneficial or Not and Who decides? (John W. O’Hagan)

the State of any practical freedom of action to which it is legally

entitled. These questions can be asked, and answered, without using

the term ‘sovereignty’

Thus in deciding whether or not to proceed with some international

treaty the key issue is does it enhance or diminish a state’s practical overall

freedom of action to enhance the wellbeing of people in that nation, namely

the sovereign good? In other words as pointed out in the Lowe quotation

above, it is the balance of practical, realistic implications of the decision not

the decision per se that matters.14

To sum it up, There is little doubt that by entering into international

agreements/treaties regardinga state’s economic policies towards

integration potentially enhances not diminishes its freedom of action in

pursuit of the economic sovereign good. It is also clear that sovereign power

or freedom of action is one of degree only, depending on the size of a

country and its interdependency with the international economy and that too

narrow an interpretation of the Constitution could in fact require the

government to hold a referendum on all major expenditure and taxation

decisions and any international agreement, bilateral or otherwise, it wanted

to enter into.15

International Economic Institutions, including the ASEAN Integration

Model are increasingly scrutinized with regard to their impact on

sovereignty, and they are often maligned because they are thought to

corrode sovereignty. While some definite criticisms have merit, the aim of

this paper has been to reconsider the sovereignty argument and to

exemplify that the all-encompassing theoretical attitude- the belief that

international institutions are necessarily a threat to sovereignty- is not the

14QC and Chichele Professor of Public International Law at the University of Oxford.15http://www.iiea.com/ftp/Publications/IIEA%20Economic%20Governance%20Paper%202_IIEA_Shared_Economic_Sovereignty_2013.pdf

only viable approach. When states seemingly surrender sovereignty, they

may in fact strengthen it.

CONSTITUTIONAL RESTRICTIONS

The 1987 Philippine Constitution, Article XII on National Economy and

Patrimony manifest the protectionist policy or the “Filipino First Policy” of the

State regarding its natural resources and public utilities. The wisdom behind

such constitutional provisions were provided by the Supreme Court in the

case of Miners Association of the Philippines, Inc. vs. Hon. Fulgencio S.

Factoran, Jr., et. al., (G.R. No. 98332 Jan. 16, 1995), stating: “the importance

of our natural resources not only for its security and national defense. Our

natural resources which constitute the exclusive heritage of the Filipino

nation, should be preserved for those under the sovereign authority of that

nation and for their prosperity. This will ensure the country's survival as a

viable and sovereign republic." And in the case of Wilson P. Gamboa vs.

Finance Secretary Margarito B. Teves, et. al., (G.R. No. 176579 Jun 28, 2011),

stating:“The Provision is an express recognition of the sensitive and

vital position of public utilities both in the national economy and

national security. The evident purpose of the citizenship

requirement is to prevent aliens from assuming control of public

utilities, which may be inimical to the national interest. This specific

provision explicitly reserves to Filipino citizens control of public

utilities, pursuant to an overriding goal of the 1987 Constitution: to

conserve and develop our patrimony and ensure a self-reliant and

independent national economy effectively controlled by Filipinos . ”

Article XII, Section 2

Section 2limits the exploration, development, and utilization of natural

resources under the full control and supervision of the State. However the

State may directly undertake such activities, or it may enter into co-

production, joint venture, or production-sharing agreements with Filipino

citizens, or corporations or associations at least sixty per centum of whose

capital is owned by such citizens.The President may enter into agreements

with foreign-owned corporations involving either technical or financial

assistance for large-scale exploration, development, and utilization of

minerals, petroleum, and other mineral oils.

Article XII, Section 3, 7 and 8

Section 3 is the prohibition on corporations to acquire or hold lands of

the public domain except by lease for a period not exceeding 25 years,

renewable for not more than 25 years. Sections 7 and 8, prohibits foreign

ownership of lands. Such is to ensure the preservation of the nation’s land

for future generations of Filipinos.However, the Investors Lease Act (RA7652)

permits foreign investors to lease land for 50 years, renewable once for 25

years for the purpose of establishing industrial states, factories, assembly or

processing plants, agro-industrial enterprises, land development for

industrial, or commercial use, tourism.

Article XII, Section 10

Section 10 reserves certain investment areas to citizens of the

Philippines or to corporations or associations at least sixty per centum of

whose capital is owned by such citizens, or such higher percentage as

Congress may prescribe. The state provides a Negative List where the

capitalization requirement in certain investment areas is laid down.

Article XII, Section 11

Section 11 limits the operation of a public utility to citizens of the

Philippines or to corporations or associations organized under the laws of the

Philippines, at least sixty per centum of whose capital is owned by such

citizens. The participation of foreign investors in the governing body of any

public utility enterprise shall be limited to their proportionate share in its

capital, and all the executive and managing officers of such corporation or

association must be citizens of the Philippines.

Article XII, Section 14

Section 14 limits the practice of all professions in the Philippines to

Filipino citizens, except in cases prescribed by law.

Article XVI, Section 11

Section 11 limits the ownership and management of mass media to

citizens of the Philippines, or to corporations, cooperatives or associations,

wholly owned and managed by Filipino citizens. Also, only Filipino citizens or

corporations or associations at least seventy per centum of the capital of

which is owned by such citizens shall be allowed to engage in the advertising

industry since it is imbued with public interest. The participation of foreign

investors in the governing body of entities in such industry shall be limited to

their proportionate share in the capital and all the executive and managing

officers of such entities must be citizens of the Philippines.

CONSTITUTIONAL RESTRICTIONS IN RELATION TO THE ASEAN

ECONOMIC BLUEPRINT

A key characteristic of the ASEAN Integration, as provided in its ASEAN

Economic community Blueprint, is a single market and production base for

the region. Among its five core elements are the free flow of investment, free

flow of services, and free flow of capital. This is necessary to attract foreign

and intra-ASEAN investments to ensure and promote dynamic development

of ASEAN Communities. The Constitutional restrictions impose a limit foreign

and intra-ASEAN investments to Capitalization up to 40 percent maximum

only. Also, services would be under taken directly by the government and

may enter into agreements with corporation subject again to the capital

limitations. Despite such capital limitation, the President may enter into a

Financial and Technical Assistance Agreement (FTAA) with foreign owned

corporations.

The ASEAN Economic Blueprint aims to create a highly competitive

economic region and a region of equitable economic development. To

achieve such goals, Energy Cooperation, Mining Cooperation, and Transport

Cooperation is promoted.

Energy Cooperation Mining Cooperation

The energy cooperation aims to establish a Trans-ASEAN Gas Pipeline

(TAGP) and the ASEAN Power Grid (APG) to interconnect networks of

electricity grids and gas pipelines optimize the region’s energy resources for

greater security. Such project would open opportunities for private sector

involvement in terms of investment, including financing, and technology

transfer. The mining cooperation aims to enhance trade and investment and

strengthen cooperation and capacity in geological and mineral sector for

sustainable mineral development in the ASEAN region. It also encourages the

participation of the private sector in mineral development.

In relation to the Constitution, such project and aims of the ASEAN

Economic Blueprint may be limited by the provision of the Constitution that

exploration, development, and utilization of natural resources must be under

the full control and supervision of the State. Also operation of public utilities

in the Philippines is reserved for Filipino citizens or Corporations subject to

the capitalization requirement. These constitutional provisions tend to

restrict the role of foreign entities thereby hindering the free flow of goods,

services, investments, and capital in the ASEAN region. The reason for such

provisions is the preservation of the natural resources for the future Filipino

generations; and the exploration, development, and utilization of such is for

our own national interest, posterity, and for a development of a self-reliant

economy.

Transport Cooperation

An efficient, secure and integrated transport network in ASEAN is

vital for the ASEAN Free Trade Area to enhancing the attractiveness of the

region as a single production, tourism and investment destination. ASEAN

transport is critical in linking ASEAN with the neighbouring Northeast and

South Asian countries. This aims to integrate the transport systems of the

region. Again, operation of public utilities, such as transport, is subject to the

regulation of the state as provided by the constitution and must be operated

by Filipino Citizens or corporations complying with the capital limitation

requirements. Also officer of such corporation must be Filipino citizens. Such

restrictions tend to limit the free flow of capital, investment, and services

that might be rendered by other ASEAN entities, thereby imposing

restrictions to the aims of the ASEAN Economic Blueprint.

Free flow of Skilled Labour

This allows managed mobility or facilitated entry for the movement of

natural persons engaged in trade in goods, services, and investments.

ASEAN is also working towards harmonization and standardization, with a

view to facilitate their movement within the region. However, the practice of

certain professions in the Philippines is limited to Filipino Citizens only.

Conclusion and Recommendations

The simultaneous happiness and unease over the ASEAN Free Trade

Agreement (AFTA) or its more recent transformation into ASEAN Trade in

Goods Agreement (ATIGA) and ASEAN Framework Agreement on Services

(AFAS) is much expected. These are the heart of the Asean Economic

Community for which a mindset change of stakeholders is needed to face the

end- 2015 economic integration deadline; these include politicians who have

to implement agreements committed and signed by the government,

business leaders who ask for protection and preferential treatment instead of

proactively addressing long-term problems, and the general public who must

wage a continuous battle against corruption and inefficiency.

But frankly speaking, there is no such thing as an ASEAN mindset. Most

Southeast Asians’ perspectives are not set in our region but in countries

outside it. Frankly speaking, very few Filipinos have a sense of an ASEAN

identity. We relate more with Americans than with Indonesians or

Vietnamese and this is prevalent in most countries in the region.

Economically speaking, some experts say that the region, more so the

Philippines, is not yet ready for economic integration. Aside from the fact

that the member-countries are not on the same level in terms of economic

growth, some countries also have unstable economies due to their political

contexts (i.e. Myanmar)

The success of ASEAN regional integration will depend on how this

affects the agricultural sector

The implementation of the Asean Free Trade Agreement is a fast

approaching and it is doubtful if the agricultural is ready for this. Can our

farmers compete with other Asean countries when tariff and non-tariff

barriers are eliminated within the Asean region? Sadly the answer to this

question is a resounding “no” and the tragedy here is that the government,

through the Department of Agriculture, is not doing anything substantial to

make the Philippines ready for an Asean free trade regime.

The continuing news about the smuggling of rice, sugar, vegetables

and other agricultural product is the clearest indication that we are not ready

yet for free trade. Smuggling of agricultural products will not prosper if our

rice, our sugar and out vegetables can compete against these foreign

products in terms of quality and price. If the Philippines is going to honor its

WTO free trade commitments and avoid WTO sanctions, the government no

longer has the legal right to impose prohibition on rice importation. Of course

the tariff system of the Philippines will still be imposed under our WTO

agreement. Custom duties corresponding to their ad valorem equivalents will

be imposed on imports of rice and other agricultural products.

The lifting of the trade quota or quantitative restrictions on the

importation of agricultural and meat products under our WTO commitments

means the Philippines is now bound to remove all trade barriers even on the

importation of tightly regulated rice products as provided by the Agreement

on Agriculture forged in the Uruguay Round of Multilateral Trade

Negotiations of the WTO where the Philippines is a signatory.

It should be pointed out that the Asean Free Trade Agreement to take

effect in 2015 is even more liberal on agricultural product import since under

the Asean regional trade agreement where zero tariff will be adopted.

The success of ASEAN regional integration will depend on how this

affects the labor market and quality of life of women and men in the

region.

The ASEAN integration has challenges and opportunities that will

accompany the ASEAN economic community, including managing labor

migration, boosting productivity and wages, and improving job quality. We

offer policy recommendations for creating better jobs and ensuring that the

benefits of the ASEAN economic community are equitably shared among

different countries and sectors.

The ASEAN economic community will create a single market and

production base and new opportunities for prosperity for the region's 600

million women and men. This will have implications for job gains and losses,

skills development, wages and productivity, labor migration, social protection

systems, and building connectivity. However, unless managed properly, the

ASEAN economic community may not translate into benefits for everyone

and could increase existing inequalities.

To realize the full potential of the ASEAN economic community to

deliver more and better jobs, decisive action is necessary, including better

management of structural change, ensuring that economic gains lead to

shared prosperity, while strengthening regional cooperation and tripartite

dialogue. Ultimately, the success of ASEAN regional integration will depend

on how it affects the labor market - and therefore how it improves the quality

of life of women and men in the region.

Fears over changing comparative advantages, bad environments of

doing business, more complex and chaotic global conditions, etc. must be

balanced by careful exploitation of opportunities. The Philippines has its own

strengths going into ASEAN ECONOMIC COMMUNITY 2015 ,e.g., governance

improvements that led to stronger economic fundamentals and investment

upgrades, and network of overseas Filipinos who bring information on

markets, financing options, transferable technologies on top of continued

foreign exchange remittances.

It could overcome its weaknesses by pushing for more reforms in

investment/ trade promotion and facilitation by:

Automating business procedures in national government agencies;

streamlining procedures across various offices, and making them more

transparent and consistent;

Unifying various investment promotion bodies and adopting PEZA

operation practices, harmonizing their incentives, reviewing the

Constitutional 60-40 rule on foreign equity participation and other

limitations; and

Instituting a national single window and linking its databases with the

Bureau of Customs to improve risk management ; instituting e-

government with sufficient physical and human infrastructure.

The Philippines should also pay attention to its much neglected physical

ports facilities through PPP, remove conflict-of-interest in regulatory agencies

that own certain infrastructure, review its cabotage policy, and improve the

efficiency of regulatory agencies and trade-related offices.

The ASEAN Political-Security Community and the ASEAN Socio-Cultural

Community do not receive as much attention but serve as foundations for

the economic pillar of the integration exercise in Southeast Asia. Issues such

as drug trafficking, labor migration, a peacekeeping force, strong mechanism

for enforcing human rights, and border issues among member states and

with China on maritime waters do affect the progress of the Asean Economic

Community. Local and foreign direct investments, as well as government

expenditures, are swayed in certain locations and industries according to

perceptions on these matters.

The success of ASEAN regional integration will depend on the

resolution of territorial disputes

As beautiful as it is, cultural diversity is a stumbling block for the

ASEAN ECONOMIC COMMUNITY, given that it also reflects the historically

unsolved issues of the countries that eventually erupt into  territorial

disputes.

A good example would be the century-old tension between Thailand

and Cambodia over the claims on Preah Vihear temple and surrounding

territories. Another would be the tension among the different countries

claiming portions of the West Philippines Sea, and parts of Sabah.

Looking at more recent events, of course, there’s the conflict involving

the Sultanate of Sulu’s ancestral claims to parts of Sabah. The incident

eventually led to a bloody stand-off between the Malaysian and Sulu forces

and has put bilateral relations between Malaysia and the Philippines in

jeopardy.

Another would be the conflict emerging in the West Philippine Sea and

other territories claimed by different ASEAN countries.

Despite the rich history of the region, a lot of conflicts remain

unsolved. This Angkor Wat in Cambodia became the cause of the Phnom

Penh riots when a Thai actress made a false claim that the temple belonged

to Thailand.

We believe the reason for such disputes in the region is that we have

not yet solved issues involving our historical differences. We have kept the

issues in our history books hoping that they will not be tackled. The truth,

however, is that such issues still affect how ASEAN peoples interact with

each other.

Openness to other cultures, ironically, is not so widespread in most

parts of Southeast Asia. This problem even starts at the local levels. We do

not even have to look far. In the Philippines, the peace process between the

government and the Muslim groups in Mindanao is still a struggle. Even with

the Bangsamoro entity, there is still tension with other Muslim groups in the

island.

Creating an economic community

We do not have an ASEAN mindset to begin with. People from

Southeast Asia relate more with Europeans, Americans, Koreans and

Japanese rather than with people from their own region. We do not think

ASEAN. We think outside of it.

Aside from being a Filipino, the next bigger picture is being Asian, not

even Southeast Asian.

If we talk about economics, some would argue that, perhaps we are. If

we talk about culture, awareness and identity, we would say no. How can we,

after all, be ready for something that very few people know of?

Creating an economic community with citizens who are almost

indifferent to each other would be problematic. If there’s no sense of

identifying with people from our region, how can we have interconnected

trading networks and businesses? Without focusing on making people aware

they are part of ASEAN, how can we expect them to work together smoothly?

One of the strongest criticisms of ASEAN is that it is exclusive to

leaders, and that awareness does not trickle down to ordinary citizens. This

is, perhaps, partially true. There is a need for greater awareness and

knowledge in the region about the region. We believe this is a prerequisite to

a successful Asean Economic Community.

Southeast Asia has great potential and so does economic integration in

2015. It must, however, follow the right preparatory steps. Perhaps, there

should be equal focus on strengthening the economic and the community

aspects of the ASEAN economic community.

National Statistical Coordination Board (NSCB) Former Secretary-

General Romulo Virola in 2012 even said that the Philippines is not yet ready

to benefit from the economic integration in 2015 given that we still have to

focus on the problems of our local economy. More than economics, many

unresolved differences in the region and the lack of ASEAN identity might

become stumbling blocks for the envisioned economic integration. We

believe that more focus should be given to such issues to have a successful

ASEAN economic community.

However, ready or not ready, the Philippines is committed to free trade

within the Asean region by 2015 because of the international agreement that

we have signed.