ASEAN economic community: Rules of engagement

FROM A FLEDGLING organization of five member-states in 1967, the Association of Southeast Asian Nations (ASEAN) has evolved into a dynamic force in the global arena. The ASEAN “solar system” now has 10 countries revolving around its axis. The analogy is quite apt considering that each of these countries has different stages of growth and their position relative to the ASEAN integration initiatives is determined by their level of preparedness to engage in the envisioned one economic community.

A regional economic integration is the goal of the ASEAN Economic Community (AEC). This is expected to be fueled through a single market and production base. However, the gap between the wealthiest and poorest members continues to pose real challenges especially in the areas of standards harmonization, tariff reductions, and the implementation of free trade agreements.

The difficulties notwithstanding, ASEAN continues on its path towards full integration -- economic, political-security and socio-cultural -- recognizing the value of a strong united region in achieving stability and prosperity for its member-states. The effects of the various integration initiatives are already being felt through an increased intra-ASEAN trade. It is fueling individual country initiatives to boost productivity and competitiveness and strengthening capabilities to take advantage of the expanded market.

In the Philippines, the business community is all too aware that the countdown for the 2015 integration looms large in the horizon. The potential to grow is certainly there, but taking advantage of these opportunities requires hard work, preparation, and even organizational transformations. With just 21 months left for the projected AEC-integration by December 2015, preparations must now move from information to action.

The AEC will be a game-changer that requires new rules for engagement and the issues that must be addressed.

KNOW THE RULES
ASEAN member-countries have made significant progress in the lowering of intra-regional tariffs through the Common Effective Preferential Tariff (CEPT) Scheme for ASEAN Free Trade Area (AFTA). In the 2013 Joint Meeting in Singapore, key achievements were highlighted, among which were the implementation of the ASEAN Harmonized Tariff Nomenclature (AHTN) 2012/1 by all 10 ASEAN member-states, completion of the ASEAN Single Window Pilot Project Component 2, and the commencement of the ASEAN Customs Transit System component under the ASEAN Regional Integration Support by the EU Program.

With the customs integration and standards harmonization on track, it is expected that the trade barriers (both tariff and non-tariff) will be eased. How will Philippine businesses take advantage of the open region? What are these trade agreements and how will they impact on business decisions to engage in the ASEAN market? What industries will most likely thrive in these developments... and what happens to the rest?

KNOW THE RISKS
The ASEAN Comprehensive Investment Agreement (ACIA) is a mechanism that is expected to create a free and open investment regime/environment in the context of an integrated economic community. It is ASEAN’s response to increase global competition and to enhance the attractiveness of ASEAN as a single investment destination.

There are never guarantees for engaging in global and regional business initiatives, but having a mechanism such as ACIA lessens the uncertainties and provides more confidence that when investments are made, there are rules that can both enable and protect the investors and the countries they will put their money into.

What are the provisions of the ACIA and how can businesses take advantage of the opportunities? How can the government make the Philippines a sound investment proposition? How can the local businesses expand their market reach through linkages with potential business partners in the region? How will such investments and partnerships be enabled, protected and strengthened?

KNOW THE REGION
A combined population of approximately 600 million, with an aggregate GDP of at least $2.2 trillion and trading at over $2.4 trillion -- this is the combined might of the ASEAN countries. This is what its trading partners are excited about -- and this is the opportunity that businesses can look forward to when they engage in this market. The time to look for prospects is now -- 2015 is just around the corner and companies need to work double time to be prepared for this new wave.

Where do we start? Which among these ASEAN member-states provide the most attractive environment for business to develop and thrive? How do companies take advantage of this expanded playing field?

KNOW THE RESOURCES
With the ASEAN integration and the promise of a robust economy in the region, it is expected that retention of skilled human resource will pose a major challenge for the countries. People will go where the compensation is better, where their competencies can be put to good use and where their career growth will be accelerated.

What impact will the free movement of people in the region have on productivity and competitiveness of each member-country? Will the more progressive member-state have the distinct advantage of securing their needed human resource and unwittingly create problems for the less-developed economies? What human resource strategy should be adopted to mitigate the negative effects?

KNOW THE REWARDS
There are many challenges in the integration but there are also stories of successful voyagers who rode the waves of change and continue to take advantage of the oceans of opportunity. Bigger market, economies of scale, better profits -- these are part of the gains that can be achieved in the integration but only if the business ships sail.

Change is coming. ASEAN integration is happening. There is no turning back and staying put is no longer an option. We must learn to adapt to the new order, identify opportunities, improve our capacities and capabilities, reconstruct our competencies and get ready to swim from a small pond to the big ocean. This journey will not be for the faint-hearted so let’s be brave and take intelligent risks.

The Management Association of the Philippines (MAP) is doing its share to promote awareness of the ASEAN integration and how business can get ready to engage. We invite you to attend MAP’s forum series on the AEC Rules of Engagement to be held on April 29, June 24, August 26 and Oct. 28. Contact the MAP Secretariat via 751-1149 to 52 or mapsecretariat@gmail.com for more details.

(The author is the Chairwoman of the MAP ASEAN Integration Committee and the MAP CEO Conference Committee. She is the President and CEO of Health Solutions Corporation. Send feedback at mapsecretariat@gmail.com and alma.almadrj@gmail.com. For previous articles, visit map.org.ph.)

As BRICS grow up, 10 upstarts emerge

PARIS -- Indonesia, Bangladesh and Ethiopia are among 10 countries set to take over as emerging economies from the powerful BRICS nations as they struggle with growing pains, a French credit body said on Tuesday.

"After 10 years of frenetic growth" the big five emerging economies of Brazil, Russia, India, China and South Africa -- the BRICS -- "are slowing down sharply," the French trade credit and insurance group Coface said.

In a report entitled "Coface identifies 10 emerging countries hot on the heels of the BRICS," the organization said that average economic growth by the BRICS this year would be 3.2 percentage points less than the average in the last 10 years.

But "at the same time, other emerging countries are accelerating their development," it said.

The growth of emerging economies and the effect this has on world trade flows is closely analyzed by economists because of the huge impact on every aspect of the global economy and power balances.

Coface broke the 10 new emerging economies it has identified into two groups.

The first comprises Peru, the Philippines, Indonesia, Colombia and Sri Lanka, which it named the PPICS. They had "strong potential confirmed by a sound business environment," Coface said.

The second group comprises Kenya, Tanzania, Zambia, Bangladesh and Ethiopia. But these countries are marked by "very difficult or extremely difficult business environments which could hamper their growth prospects," Coface said.

However, the head of country risk at Coface, Julien Marcilly, said that in 2001 "the quality of governance in Brazil, China, India and Russia was comparable to that of Kenya, Tanzania, Zambia, Bangladesh and Ethiopia today."

But the 10 "new emerging countries" currently accounted for only 11% of the world population whereas the BRICS had accounted for 43% of the population in 2001.

The total GDP of the new 10 was only 70% of the output of the BRICS in 2001, and they had a current account deficit of about 6% of GDP whereas the BRICS had run a surplus on average.

On a positive note, the new 10 had inflation which was about 2.8 percentage points lower than BRIC inflation in 2001, and their public debt was about 40% of output compared with 54% for the BRICS at that time.

Mr. Marcilly said that the BRICS were moving into a new phase since their exports were becoming less competitive, and because they were not yet competitive in offering products with very high added value.

This was why Coface had set out to identify the next wave of driving emerging markets, looking for potential annual growth exceeding 4%, a diversified economy without undue dependence on the sale of raw materials, and some capacity to absorb economic shocks. These had to be matched by a financial system capable of supporting investment, but without raising overheating risks.

The chief economist at Coface, Yves Zlotowski, said they had tried to combine measures of growth potential and risk potential. -- AFP

SOURCE:  Businessworld

The failure of ASEAN leadership?

CANBERRA, Australia – It was a packed auditorium – a surprisingly gentle and curious audience at the Australian National University (ANU) looking for reasons to be excited about the Association of Southeast Asian Nations (ASEAN), a 10-member grouping of more than 630 million people that represents Australia’s 2nd largest trading partner.
 

Yet, Vietnamese career diplomat Le Luong Minh, who took over the leadership of ASEAN last year, couldn’t help but disappoint them because in many ways he represents much of what’s wrong with ASEAN today.

ASEAN Secretary-General Minh opened with a speech that did little to excite the audience. He focused on ASEAN’s 6 pillars when it was formed in 1967 and its most ambitious project since then – creating one regional economic grouping, the ASEAN Economic Community (AEC) slated to come together by December 2015.

Someone asked about tensions between Australia and Indonesia, ASEAN’s largest member, over asylum seekers and recent wiretapping charges from NSA classified documents.

“I hope these bilateral issues can be resolved amicably,” said ASEAN’s leader. “We have not seen any negative impact of that bilateral relationship on the ASEAN-Australian partnership.”

On ASEAN’s most contentious issue – the conflict between China and many ASEAN member countries in the South China Sea, Minh said, “ASEAN is of the view that it needs to be resolved, but it can only be resolved, and it should only be resolved, between the parties concerned.”

Minh was safe, uninspiring and bureaucratic. ASEAN insiders say it’s the luck of the draw, and that the rotating head of ASEAN moves from a politician like former Thai Foreign Minister Surin Pitsuwan, who can inspire outside interest, to a bureaucrat who can set the ASEAN house in order like Minh. From 2004-2011, Minh was Vietnam’s Permanent Representative to the United Nations while at times concurrently his country's Deputy Minister for Foreign Affairs. 

Unfortunately, he's also ASEAN's least likely salesman.

Dynamic time

Yet, it’s an exciting and dynamic time when a single, liberalized ASEAN could boost investments significantly. There’s also an opportunity for ASEAN to provide much needed leadership at a time of shifting geo-political power.

ASEAN is at a crossroads. Created at a time of global dominance by the United States, times have changed - with economic power shifting to China. Instead of taking leadership, ASEAN is in danger of becoming a low-intensity proxy battlefield. 

Nations like the Philippines, Malaysia and Indonesia are unprepared for open conflict with China or even for negotiating with China over the South China Sea. Many ASEAN nations turn to the United States for defense support. At the same time, ASEAN’s poorer nations, Cambodia, Laos and Myanmar, have become so dependent on China that analysts call them “client states of Beijing.”

This leaves an opening for Australia, ASEAN’s 1st dialogue partner.

“ASEAN does have an identity in Australian diplomacy, and it’s a positive one,” said Senator Brett Mason, the Parliament Secretary to the Minister for Foreign Affairs, who acknowledged the changing global power structures and Australia’s shifting focus to Asia. “It’s a forum that could be used more creatively and more fully, but I don’t think it’s ineffective.”

I’ve been reporting on ASEAN since 1987. I was there in the late 1990s when Cambodia, Laos, Vietnam and Myanmar were admitted in the grouping, creating a three-tiered system because these economies lagged far behind original members Indonesia, Thailand, Malaysia, the Philippines and even more affluent Brunei and Singapore.

Like many Asians, I hoped constructive engagement would be a different way to push reforms, more effective than the confrontational push from the West, but decades later, constructive engagement remains an excuse – a failure of leadership. Reforms in Myanmar, which was the main focus of constructive engagement, were fueled by an internal process - with little help from ASEAN.

During the financial crisis of 1997, which started in Thailand and spread to Indonesia, the nations turned, not to ASEAN, but to the International Monetary Fund (IMF). When smog and haze from forest fires in Indonesia that same year engulfed cities in Malaysia and Singapore, ASEAN proved incapable of working together to prevent this near-annual event that continues to plague the region today. 

In 1999, ASEAN was criticized for failing to hold Indonesia accountable for what was effectively a scorched earth policy in East Timor. Leadership then came from Australia, which led INTERFET, an international non-UN peacekeeping force.

In the late 2000s under pressure from some members, ASEAN formed a human rights body that’s stayed largely silent on ongoing human rights violations within ASEAN, like in Vietnam or the Rohingyas in Myanmar.

Fissures over China

Dealing with China clearly shows the fissures inside ASEAN. At the July, 2012 meeting in Cambodia, conflict erupted openly. For the first time ever, the foreign ministers failed to agree on a joint statement - with Filipino officials storming out of the meeting. Other ASEAN states accused host Cambodia of working against ASEAN interests by protecting China, Cambodia’s largest trading partner. Two months later, Cambodia announced $500 million in new assistance from China. 

While largest nation and founding member Indonesia tried to use shuttle diplomacy for a satisfactory agreement, ASEAN again fell short of leadership.

Still, Australian officials seem optimistic.

On March 19, Australian Foreign Minister Julie Bishop hosted ASEAN’s Secretary-General Minh for the 40th anniversary of a partnership she says now prioritizes trade, investment, regional security and education.

40 YEARS. ASEAN Sec Gen Le Luong Minh with Australian Foreign Minister Julie Bishop

“The extent of government contact – economic, financial – really is at a much higher level now than a decade before that,” a senior foreign affairs official told me. “Building ties just below the political level, senior level official contact, over the last decade has given our relationship a lot more ballast than ever before.”

The problem lies in two areas: ASEAN makes decisions based on consensus, unwieldy in today’s fast-moving world and in an organization that spans a wealth gap from Singapore to Laos; and that wealth gap leads to differences in leadership experience and style.

Cambodia, Laos, Vietnam and Myanmar tend to have fewer officials capable of participating fully in meetings held in English. The most progressive of these nations, Vietnam, used government money to train a new generation of foreign service diplomats like Minh.

Consensus not enough

Still, the skills needed for consensus building are not enough to inspire faith in the ASEAN way, and senior officials who have led ASEAN, with few exceptions, have not had the charisma or status to demand necessary meetings with heads of states.

In order to effectively push forward an ambitious ASEAN agenda of one market, ASEAN must move faster, and its leader must lead – not just within ASEAN but among its dialogue partners and potential investors. 

“While there’s so much criticism about ASEAN in terms of leadership, ASEAN is all we have to work with,” said Deakin University’s Dr. Sally Wood. “I don’t know if they ever really expected that they would reach this level of centrality. There are so many contending national interests in the region. So that makes it very challenging for ASEAN to be able to speak with one voice.”

ASEAN Sec-Gen Minh is trying to fill a tall order, and insiders say his experience is helping build the organization behind the scenes. At ANU, he said he’s optimistic that the economic integration of ASEAN, which promises a single market and a highly competitive region, will happen as scheduled on December, 2015. 

“ASEAN has implemented about 80% of all the measures,” he told the audience at ANU.

Not all agree.

“We’ve got to be realistic. I cannot see that this is going to happen,” said Professor Andrew Walker, Acting Dean of ANU College of Asia and the Pacific.

“It looks unlikely that AEC 2015 will be met,” added Wood. “Perhaps it doesn’t matter that it won’t be realized in 2015, but that ASEAN is working on it.” - Rappler.com by Maria A. Ressa

Phl least attractive

University of the Philippines (UP) Professor Benjamin Diokno has submitted a study that the Philippines will be the least attractive investment destination in Association of Southeast Asian Nations (ASEAN) once it formally integrates as an emerging bloc in 2015.

Diokno pointed out that the Philippines does not have a good governance record and does not have a favorable tax regime. The Philippines is lagging behind its Asean neighbors in infrastructure. For this reason, the Philippines will be the least preferred investment destination.

Diokno pointed out too that among ASEAN-5 economies, the Philippines has the biggest corporate tax rate at 30 percent as compared to Singapore’s 17 percent and Thailand’s 20 percent. He also stated that the conflict between the high corporate income tax (CIT) rate and the low tax effort can be attributed to rampant smuggling; the proliferation of redundant fiscal incentives which has been estimated, conservatively, at one percent of gross domestic product (GDP); and poor tax administration.

Several lawmakers have proposed lowering the corporate income tax rate to 25 percent. Also still pending are bills to rationalize fiscal incentives. Tax administration must be further improved to at least 15 percent of GDP. After four years, that appears to be difficult to achieve.

BIR Commissioner Kim Jacinto Henares is a permanent fixture in our annual top 10 performances of government officials. She has increased tax collections every year and has a towering reputation for being immune to compromise. There has only been one criticism — that is of not applying the law equally to subjects of the same class.

A 3rd Malampaya contractor has been slapped with tax evasion charges. What about the hundreds of contractors of other high profile government projects? Are Solenn Heusaff and Judy Ann Santos really the only A-List media personalities who have not filed the correct returns? A Luxury car dealer has been assessed with back taxes but Mercedes Benz, BMW, Lexus, Rolls Royce, Jaguar, Ferrari, among others, have not been touched.

Relief goods dumping

Officials of the United Nations World Food Programme (WFP) have complained over the dumping of food and other relief items in Palo, Leyte. Palo Mayor Remedios L. Petilla explained that 4 sacks of rice and 2 sacks of used clothing were dumped because they were rotten.

Department of Social Welfare and Development (DSWD) Secretary Dinky Soliman is now investigating the matter to find out the extent of the dumping and where did the rotten goods come from.

Meanwhile, Secretary Edwin Lacierda reported that out of the P25 billion in pledges by foreign governments, only P600 million have been received.

P515 million pork scam

The Commission on Audit (COA) has released a new audit report on a P515-million pork scam released through the National Commission on Muslim Filipinos (NCMF), an agency under the Office of the President headed by former elections commissioner Mehol Sadain. Two senators and 38 former and incumbent congressmen are involved.

The funds were released through 18 foundations and non-governmental organizations (NGOs), some of which were identified with Janet Lim-Napoles. The funds came from the Priority Development Assistance Fund (PDAF) of the lawmakers, with P25 million coming from Disbursement Acceleration Program (DAP).

The COA audit report said the memorandum of agreement between NCMF, the lawmakers, and the NGOs lacked certain requirements and even supporting documents prescribed by COA Circular No. 2007-001.

The congressmen involved are Maximo Rodriguez (Abante Mindanao), Nelson Collantes (Kaagapay - Batangas), Homer Mercado (1-Utak), Michael Angelo Rivera (1-Care), Jose Benjamin Benaldo (Cagayan de Oro City), Justice Marc Chipeco (Calamba City), Jonathan Yambao (Zamboanga Sibugay), Angelo Palmones (Agham), Nur Ana Sahidullah (Sulu), Isidro Lico (Ating Koop), Neil Benedict Montejo (An Waray), Erico Basilo Fabian (Zamboanga City), Nicanor Briones (Agap), Yevgeny Vicente Emano (Misamis Oriental), Daryl Grace Abayon (Aangat Tayo), Raymond Democrito Mendoza (TUCP), Antonio Kho (Senior Citizens), Mariano Piamonte (A Teacher), Lorenzo Tañada III (Quezon), Salvador Cabaluna III (1-Care), Maria Isabel Climaco (Zamboanga City), Sharon Garin (AAMBIS-OWA), Ponciano Payuyo (Apec), Hajiman Hataman-Salliman (Basilan), Simeon Datumanong (Maguindanao), Cesar Jalosjos (Zamboanga del Norte), Franklin Bautista (Davao del Sur), Fatima Aliah Dimaporo (Lanao del Norte), Arnulfo Go (Sultan Kudarat), Bernardo Vergara (Baguio City), Romeo Jalosjos Jr. (Zamboanga Sibugay), Teodorico Haresco (Ang Kasangga), Rosendo Labadlabad (Zamboanga del Norte), Arturo Robes (San Jose del Monte City), and Anthony Golez (Bacolod City).
COA also released an audit report on P100 million released by congressmen to the Philippine Forest Corporation (PhilForest) that also used NGOs.

Meanwhile, the COA also released an audit report that 141 congressmen had funneled their PDAF allocation through the Technology Resource Center (TRC). They were implemented by NGOs not connected with Napoles.

Top CPP-NPA leaders arrested

Two top Communist Party of the Philippines-New People’s Army (CPP-NPA) leaders were arrested by Philippine Army (PA) elements in Carcar, Cebu, together with 6 others. Benito Tiamzon, the head of the CPP-NPA and his wife, Wilma Austria.

Department of National Defense Secretary Voltaire Gazmin confirmed the arrest. President Aquino said this is a big blow to the communist rebels since Benito Tiamson is chairman of the CPP and heads the NPA. This is probably the big fish that President Aquino said would be arrested. There is a P5.6 million reward for Tiamson.

Lawyers for the Tiamsons claimed that their arrest was illegal because they were covered by the Joint Agreement on Safety and Immunity Guarantee (JASIG), and were consultants in the peace talks. The Tiamsons are now detained at Camp Crame.

Their arrest order was issued by the Regional Trial Court (RTC) of Laoang in Samar on charges of multiple murder and frustrated murder cases.

Tidbits: PDEA-Albay provincial officer Arnel Estrellado was shot five times by two men on a motorcycle in Sorsogon City.

India is now polio free, one of the greatest medical victory — millions have been vaccinated.

Greetings to women achievers — Senator Cynthia Villar, Lily Monteverde, Rep. Lucy Torres-Gomez, Rep. Leni Robredo, Prof. Miriam Coronel Ferrer.

SEARCH FOR TRUTH By Ernesto M. Maceda (The Philippine Star)

March 16, 2021

DON’T WORRY. This is not one of those doomsday scenarios. March 16 is a day of no significance in the Philippines. Most of us think so.

2021 is just seven years from now. This article is about an event that should be a reason to celebrate in a big way if we just realize its historical significance. Thus, it is written with the hope that various sectors in our society think about how we are going to celebrate this important event for the Philippines and the world.

March 16, 2021 marks the 500th anniversary of the discovery of the Philippines by Ferdinand Magellan (known to the Spanish and Portuguese speaking countries as Fernando de Magallanes and Fernao de Magalhaes). By citizenship he was Portuguese, born and grew up in Portugal and even became a page to the Queen.

The date also marks an important achievement of mankind in proving that the world is round. Up to that time, “common” knowledge was that the world was flat. Not only that, it was the first time that men circumnavigated the world.

Such a feat has been attributed to Magellan (though he was killed in Mactan, Cebu) as the leader of that famous expedition. Some claimed though that he doesn’t deserve such honor since he did not live to complete the voyage, but it should belong to the few of his crew (18 of the original 260) belonging to the Armada de Maluco who managed to go back to Spain.

Some historians do say that he still deserves the honor since, as a young soldier of the Portuguese crown, he served in Malacca which at that time belonged to Portugal. But was it really Magellan who was the first to do it, or the 18 who returned to Spain?

ENRIQUE, THE SLAVE
On March 25, 1505, the young Magellan served the Portuguese crown and sailed with Portugal’s first war fleet to reach the East. In the process, the Portuguese expedition conquered Goa and Malacca. It was in Malacca that Magellan purchased a Malay slave that he gave the name Enrique. Because of some problem, Magellan was sent back to Portugal and brought his slave with him.

It was in Malacca too that Magellan heard about the Isles of Gold, situated northeast of the Malay Peninsula. It was reported that he made an authorized trip to these Isles of Gold (or somewhere close by) that earned him an administrative case and caused his repatriation.

At that time, Malacca (Melaka in present Malaysia) was a thriving Portuguese port that served as an entrepot for goods coming from China and the rest of present day Southeast Asia. It was there that traders from India and the Middle East came to exchange or buy goods for their lucrative trading operations in their home countries, Europe, and in the countries where they made ports of call. Among those traded “goods” were slaves.

Back in Portugal, Magellan hatched the plan to sail to the Spice Islands by going west. He presented his plan to the King of Portugal but did not get support. Frustrated, he went to Spain to present his plan to King Charles and support was granted.

It is interesting to point out that part of the group of Magellan’s expedition when he left Spain (Seville in particular) was his slave Enrique. Enrique is reported to have been Malay, meaning a Malaysian in today’s parlance. This may not hold water because how can someone of their own blood be sold in a slave market right on their own soil? It would be unthinkable for a Roman to be sold as a slave on Roman soil. Thus, slaves sold in Roman markets were foreigners (blacks from Africa, whites from the present day British Isles, and barbarians). Let’s just leave this point for now.

When Magellan’s expedition discovered what we now call the Philippine Islands, Enrique became very handy because he understood the language of the people of the islands. Thus, he provided a very important point of communication between Magellan’s crew and the natives. Finally, they reached Cebu and that fateful day when Magellan went to Mactan to battle with Lapu-Lapu and he met his final destiny. So the Spaniards hurriedly scampered away when the Cebuanos were ready for the kill. Enrique took that opportunity to abandon ship. In doing so, did Enrique finally connect back with his roots?

From Pigeffeta’s accounts on Magellan’s expedition, he tells us that they actually saw and met foreign traders in Cebu and slaves were part the commodities they carried in their boats. We also know from our history that Muslims from Sulu and Maguindanao carried out raiding expeditions in the Visayas and Luzon to capture slaves for lucrative markets even before the coming of the Spaniards. Did some of those slaves end up in the Malacca bazaars?

It would seem that this is the case because at that time, it was the largest bazaar in this part of the world, a place where traders usually converged to transact their lucrative business for spices and slaves.

If Enrique was not Visayan, why did he understand the language of the people in the Visayas? Today, that would include the Warays, Leyteños (Southern part), Boholanos, and the Cebuanos because these were the areas visited by Magellan’s fleet. I actually asked a friend from Malaysia to speak his native tongue. I wanted to test if Malay and Bisaya are similar. Bisaya is my mother tongue and I could not understand what he was saying. If Enrique was indeed Malay, it is very improbable that he understood Bisaya. My only explanation to this is that he himself was Bisaya.

Therefore, was it a Filipino who first circumnavigated the world?

I would like to leave this question for historians to settle. Maybe it’s time we revisit our history prior to and immediately after the arrival of the Spaniards to get to know more about our past. After all, Filipinos are known all over the world as seafarers and today they form a sizeable percentage of crews of the international shipping industry. Was Enrique the first Filipino international seafarer? Was he the first to circumnavigate the world?

I hope this article ignites interest among our academics to delve deeper into this question. It is fitting that if such is the case, we shall be celebrating 500 years since the first circumnavigation of the world by a Filipino on March 16, 2021. Maybe by then March 16 will be marked as an important date in Philippine calendars.

(This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines. The author is a member of the MAP Agribusiness and Countryside Development Committee, and the Project Manager of the Farm Business School project of MAP and Dean of the MFI Farm Business School. Send feedback to mapsecretariat@gmail.com and renegayo@gmail.com. For previous articles, visit www.map.org.ph.)

source:  Buinessworld

Hot emerging markets? The curious case of the Philippines and Mexico

The Aquino administration has very good press these days—outside the country.  In two major international publications, the Philippines under President Aquino has been the toast and talk of the town.  In early February, Keith Bradsher recently gave a heads up in a much-read New York Times piece where he wrote: “Political analysts say that his administration has fought and reduced the corruption that played a role in holding the Philippines back. In one practical measure of that change, the country has been able to pave more roads per 100 million pesos in spending (about $2.2 million) than before — when funds were lost to corrupt officials and incompetence — finally addressing an impediment to commerce.”

At around the same time, Karen Brooks, writing in January/February issue of Foreign Affairs, claimed that it is no longer Indonesia but the Philippines, “the region’s other archipelago, that is now providing the biggest upside surprise. The Philippine economy expanded by 6.6 percent in 2012, exceeding most economists’ predictions, and was among the fastest-growing economies in the world in the first half of 2013, expanding by 7.6 percent…The Philippine Stock Exchange Index has posted record highs since President Benigno Aquino III came into office in 2010, and approvals for foreign investment have more than doubled in that period. The country’s inflation is low, its foreign exchange reserves are high, and its public debt is steadily declining. As a result, all three of the major credit-rating agencies upgraded Philippine sovereign debt to investment grade in 2013: the first such rating in the country’s history.”

The articles are not uncritical, citing continuing problems of poverty and inequality.  But, for the most part they’re very upbeat and provide an interesting balance to the critical opinions rife in the local media.

To be sure, much of the praise is deserved, especially for the president’s crusade for the much-needed Reproductive Health Law, his leadership on the anti-corruption front, and the country’s enviable political stability owing partly to his seemingly unassailable popularity.

But one wonders if there is not also something else going on, especially when one notes how similar assessments are currently being made of Mexico, a country that had been written off as a hopeless “narco-state,” much like the Philippines had been derided as the “poor man of Asia.”  In the Feb 24 issue of Time, Michael Crowley writes, “Now the alarms are being replaced with applause.  After one year in office, [President Enrique] Pena Nieto has passed the most ambitious package of social, political, and economic reforms in memory.  Global economic forces, too, have shifted in his country’s direction.  Throw in the opening of Mexico’s oil reserves to foreign investment for the first time in 75 years, and smart money has begun to bet on peso power.  ‘In the Wall Street investment community, I’d say that Mexico is by far the favorite nation just now,’ says Ruchir Sharma, head of emerging markets at Morgan Stanley. ‘It’s gone from a country people had sort of given up on to becoming the favorite.’”

These glowing reviews of two economies previously regarded as close to moribund lead one to ask if the judgment of the international business press is something that is based not only on what is actually going in these countries but on what is happening in the global economy.
Three phases of the global economic crisis
The global economy has been in crisis for the last six years.  There have been three phases to the crisis.  In the first phase, 2008 to 2010, Wall Street’s financial implosion dragged the US economy to deep recession that saw unemployment climb to nearly 10 per cent of the work force.  Predictions of sustained recovery have been continually dashed over the last three years, as consumers have preferred not to spend but to save tin order to dig themselves out of the massive debt they accumulated in the years that their unrestricted consumption served engine of the world economy.
The second phase, which began in earnest early in 2010 and intersected with the first phase, was the so-called sovereign debt crisis of the European economies, as international banks panicked at the huge loans they had made to businesses and governments in Southern and Eastern Europe and refused to make further loans until they were paid back.  The ensuing austerity programs that were implemented not only in the highly indebted countries but also in troubled Western European economies like Britain and France, practically eliminated Europe as a motor for global recovery.
During this second phase, there were hopes that the so-called BRICS—the acronym for Brazil, Russia, India, China, and South Africa—would fill the void vacated by Europe and the US.  While these economies stumbled as a result of the Wall Street implosion in 2008 and 2009, they appeared to have recovered their momentum by 2010, propped up in some cases by massive stimulus spending like China’s $585 billion program, which was the world’s biggest stimulus in relation to the size of the economy and which did shore up its fellow BRICS and many developing economies owing to China’s demand for minerals, raw materials, and manufacturing inputs.
Noble Prize laureate Michael Spence was the most prominent voice of a school that saw the BRICS as the savior of globalization. “The major developing economies have displayed remarkable resilience in the crisis and its aftermath,” he wrote in his 2011 book The New Convergence.  “Growth is returning and is already approaching pre-crisis levels in Asia (East and South) and in Latin America, the latter helped in no small measure by the tailwind provided by Asian growth….[T]his growth is sustainable even in the event of slow medium-term growth in the developed countries.  The reason is that the size of the emerging market economies taken together is large and growing.”
Spence concluded: “The persistence of growth in the emerging markets is a major positive for the global economy in terms of overall growth and because of the positive impact it will have on the smaller, poorer developing countries.  In addition, it will lubricate the structural adjustments in the advanced economies.”
From Brics to Civets

Spence’s book was barely out in 2012 when his Brics began to falter, with the growth rate of lead economy China dropping from 11 per cent to 7 per cent.  The plunge in China’s BRICS partners was even more drastic, with Brazil’s growth, at 2.5 per cent in 2013, even lower than sickly Japan’s, as the Economist pointed out.  The problem was that most of the BRICS had not been able to wean themselves out of dependence on the US and Europe for their exports.  Indeed, respected Chinese technocrat Yu Yong Ding saw the trends as indicating that China’s “growth pattern has now almost exhausted its potential.”

For international business, media, and academic establishments that have been socialized into assuming that globalization is positive and irreversible, where crises are only bumps on the road to global prosperity, the prospect of prolonged global stagnation has been deeply troubling and hard to accept.  Thus the search for new “emerging markets.”  Thus economies that would have merely merited a nod at other periods have become “hot” economies.
For finance capital seeking a place to dump and speculate on its massive surpluses, they are possible investment havens.  For technocrats, academics, and the institutional apparatuses of corporate-driven globalization such as the World Bank and Word Trade Organization, these economies may be the new drivers of growth that would lift the global economy from its six long years of stagnation and crisis.
Around two years ago, when it became clear the Brics could not be relied to sustain global growth, investors coined the term Civets (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) to denote what they saw as a dynamic new grouping.  Since then, however, Egypt and Turkey have fallen off the list owing to political instability and Indonesia and Vietnam have excited less enthusiasm owing to rising nationalism and infrastructure bottlenecks in the case of Indonesia and rising wages and a real estate in the case of Vietnam.  Mexico and the Philippines, however, are expected to inject new dynamism to the grouping.
Realities and fantasies
But really, how realistic are the expectations for Mexico and the Philippines of finance capital, which alternates between depression and euphoria and functions with an extremely short time horizon?  Is there something solid there beyond the impressive growth rates?
Some dousing of expectations might be in order.
While having some distinctive problems, the most obvious being Mexico’s drug cartels, the two countries have similar structural obstacles to sustained growth.  Both have had their manufacturing sectors severely damaged by structural adjustment policies and the flight of capital to low-wage economies.
Both are countries that have agricultural sectors that have been devastated by trade liberalization, the Philippines’ by the World Trade Organization’s Agreement on Agriculture, Mexico’s by the North American Free Trade Area (Nafta).  Agrarian reform has stalled in the Philippines and is being reversed in Mexico.
Rent-seeking groups dominate the two economies, with strategic sectors cornered by a few individuals like Carlos Slim, the Mexican telecommunications mogul who was the world’s richest man in 2012, and Manny Pangilinan, the aggressive conglomerate builder who has brought the Philippines’ telecommunications and energy sectors under the control of Indonesia’s Salim family.
What emerge from these harsh realities are countries with severe poverty and inequality.  42 per cent of the population lives below the poverty line in Mexico, and close to 20 per cent in the Philippines.  Both are sure to flunk the prime Millennium Development Goal (MDG) test of halving the percentage of their populations living in poverty by 2015.
In terms of inequality, both have terrible profiles, with Mexico’s gini coefficient—the best measure of income inequality—standing at 48.2 and the Philippines at 43.  With domestic purchasing power becoming critical as the export markets of the North and the BRICS dwindle owing to the prolonged global stagnation, these are not the statistics that would indicate a capacity to build and sustain a dynamic internal market, much less a global recovery.
Undoubtedly, President Aquino and President Pena Nieto–both scions, incidentally, of prominent political families–have made some advances in turning around their countries’ economies, but the Philippines and Mexico have a long way to go before they can qualify as “hot new emerging markets.”  The aura that surrounds them at present reflects less the realities of their economies than the desperate fantasies of international finance capital and the partisans of a failed globalization.
*INQUIRER.net columnist Walden Bello represents Akbayan (Citizens’ Action Party) in the House of Representatives.

Spain eyes PHL as next investment hub in Asia

Spain is now looking to the Philippines as the best hub to establish its presence in Asia in preparation for the Asean Economic Community in 2015, and cited infrastructure as a viable area of investment.

“I think the Philippines is the best hub we can think of to introduce our companies and our economy in Asia, and I hope that we can find good partners to start business in this part of the world,” said Spanish Minister for Foreign Affairs and Cooperation Jose Manuel Garcia-Margallo at the Makati Business Club (MBC) General Membership Meeting at the Mandarin Oriental Hotel.

This message comes at the heels of the economic recovery of Spain, which, according to Margallo, was among the European countries hardest hit by the global financial crisis.

Among the blows that the Spanish economy has experienced are a dramatic fall of its gross domestic product, high public deficit and a growing public debt.

However, with the significant fiscal reforms undertaken by the country in the past years, Spain is now changing its model based on enhanced competitiveness, productivity and export-driven, Margallo said.

Gross domestic product growth and employment rates are improving, as well as public deficit, Margallo reported and is looking to Asia, the Philippines, in particular, to be the next investment hub.

“That is why this important Spanish business delegation is here, to explore and take advantage of all the things that the Philippines may offer to Spain,” he said.  

Peter Angelo V. Perfecto, executive director of the MBC, revealed that with the Asean economic integration in 2015, Spain is looking to the Philippines as a possible hub from which Spanish economic presence can take hold in the rest of Asia.

Perfecto added that the 25-member Spanish business delegation presently in the Philippines will undertake meetings with Philippine companies, led by the Ayala Group.

 The MBC official added in a chance interview after the forum that the Spanish delegation is eyeing infrastructure development, in particular, as 37 percent of the whole transport infrastructure in the world is managed by Spanish companies.  

“We are exploring possibilities in many areas, but since the Philippines is aiming to have good infrastructure in order to attract investments to the country, infrastructure is one area that Spanish companies are especially qualified in,” said another Spanish trade official during the open forum.

Socioeconomic Planning Secretary Arsenio M. Balisacan, who also attended the forum, welcomed Spain’s  interest in infrastructure development and additionally called attention to tourism, agribusiness and  industrial manufacturing as ripe opportunities for Spanish businessmen.

The Spanish firms making rounds with their Philippine counterparts are engaged in various sectors but are mostly in infrastructure and tourism.

To solidify the commitment between Spain and the Philippines in developing business relations for both sides, a memorandum of agreement was signed on Monday between two business groups in Spain—the High Council of Chambers of Commerce, Industry and Navigation of Spain, and the Confederation of Employers and Industries of Spain—and the Makati Business Club.

According to data from the Department of Trade and Industry, bilateral trade between Spain and the Philippines grew by 19 percent from 2010 to 2012, or from $304 million to $362 million, and is the Philippines’s seventh-largest trading partner in Europe.

Bilateral trade between the two countries as of the first semester of 2013 is valued at $225 million.

In terms of tourism, 17,000 Spaniards have visited the Philippines in 2013, up by 7.7 percent from 2012, according to Department of Tourism statistics, while Filipino visitors to Spain were pegged at 50,000 in 2013.

source:  Business Mirror

How can we trust Asean integration?

THE Asia News Network website posted this headline on March 11: “Asean [the Association of Southeast Asian Nations] displays solidarity as region suffers.” The commentary accompanying it noted that Malaysia’s neighbors responded without hesitation to the missing Malaysia Airlines Flight MH370, saying this “is testing relations and cooperation among Asean friends and partners.”

Differences, if any, were set aside in order to focus on finding the plane. Each Asean member gathered whatever resources it has at its disposal to help, even if it has nothing at gain from it, except more goodwill. This is true for the Philippines, which had no citizens on board that plane.

It was a proper and humane response to a baffling incident that any country would appreciate and any regional bloc would expect from its members. But as the days pass, a darker side to the search-and-rescue effort emerges that may have long-term consequences.

Like business relationships, the progress to Asean economic integration—which will take a major leap next year—is based on trust. In the past, regional partnerships have been secured with threats, with one country forcing a partnership to serve its objectives. The Roman Empire comes to mind; so does the Greater East Asia Co-Prosperity Sphere in the early 1940s, when Japan “liberated” its neighbors from Western economic influence.

The Asean integration plan is modeled, in part, on the efforts of European nations to create the European Union (EU). While the Asean initiative has yet to go as far as EU integration has, the principles are basically the same. Some measure of national sovereignty is being sacrificed by individual countries in the hopes that a union will provide more economic benefits than every nation trying to earn them by itself.

EU members have discovered that trust is a primary foundation of the union. After the banking and financial crisis struck Greece, it was learned that Athens had lied about its financial affairs in order to join the EU. The Greek government understated its debt to reach the fiscal benchmarks necessary for full EU membership. Other EU nations suffered as a result of that.

While other Asean members were spending huge sums of money—and putting lives on the line—searching for Flight MH370, it appeared that the Malaysian government was not completely honest with them. Consider: The search was concentrated on the last-known point of contact, but it turns out the Malaysian authorities knew full well that the plane had already turned westward and reached Malaysia’s eastern coast.

Are the other Asean members going to express confidence that their co-members will be trustworthy in dealing with some details of Asean integration, such as passport and employment-credential control? Are we going to be comfortable with the potential integration of the region’s stock markets, with the regulators of other nations auditing their companies’ financial records?

The Bible says if a person cannot be trusted with minor matters, how much more with major ones. Malaysia has failed the first practical Asean integration test.

source:  Business Mirror

The Strength of Retail: in a Wider ASEAN Economy

Date: 03.19.2014

Place: Mandarin Manila, Makati City

Occasion: CTB Annual Convention

Speaker: Governor Amando M. Tetangco, Jr.

Every year, your industry comes together to exchange views on the prospects for the year ahead. With your theme this year “Thrift Banks: Preparing for 2015 ASEAN Integration”, the thrift banking industry is recognizing a development that has quietly evolved through the years and will soon crystalize. ASEAN integration – broadly through the ASEAN Financial Integration Framework or AFIF and more specifically through the ASEAN Banking Integration Framework or ABIF –will come to fruition in line with the ASEAN 2020 vision that was enunciated way back in 2007. It is, in this sense, imminent and the Chamber is being responsive by preparing for this eventuality.  In fact, for this Convention, the organizers have lined up experts to tackle different facets of integration. My role this morning is to describe the broad economic landscape, including the challenges and opportunities, that the thrift banking industry currently faces against the backdrop of ASEAN integration. The Chamber is being strategic in this way, for clearly, understanding one’s starting point and initial conditions is just as important as defining one’s final destination. The Economy at Large Let me begin therefore with the economy at large. It is tempting to simply cite the array of indicators that show that the macro-economy is strong. In 2013, we again saw the convergence of high growth and stable prices as the country posted a real gross domestic product growth rate of 7.2 percent amid an inflation of three percent. This is on top of the real GDP growth of 6.8 percent and a 3.2 percent inflation rate in 2012. We need to appreciate these numbers not just because they are better than the performance numbers that came out of 2011 (which were 3.6% real GDP growth and 4.6% inflation rate). Instead, these are excellent numbers because of the calamities that befell us during the period.1 On the external front, the balance of payments position was at USD5.1 billion for 2013. And the Gross International Reserves at almost 12 months’ worth of imports of goods and payments of services continues to provide ample cushion against external vulnerabilities. We should certainly point out that the growth of the real economy is supported by and feeds into a banking industry whose strength is well documented. Standard & Poor’s latest banking outlook (February 2014) notes that “Philippine banks will likely continue to benefit from the country’s buoyant economic prospects in 2014”. And in Moody’s own banking report (2014 Outlook dated December 2013), the Philippines is the only jurisdiction whose banking system they rate to have a positive outlook. Thrift banks as an industry may be small when compared to its universal and commercial bank peers. But it is by no means left behind. Peso deposits mobilized grew by 22 percent in 2013, loans expanded by 13 percent, total resources rose by 16 percent, while profitability increased by 18 percent. The Challenges that Lie Ahead All these should be more than enough reason to be optimistic about the future of the banking industry.  But financial markets can swiftly change course… Everyone here is more than aware that the saving that takes a long time to put together could be the investment that loses value in a “mark-to-market” second. And when financial markets get shocked, the impact leaves a mark in both depth and breadth. As an industry then, your stereotypical challenge is to maximize your strengths while addressing your weaknesses…  This brings us to the question of what a thrift bank represents… This is a question of “character” which would define the path that you will take as well as those side roads that you ought to avoid. As I look at your Asset-Liability structure, I note that 86 percent of your liabilities are peso deposits and 66 percent of assets are in loans. Although your universal and commercial bank peers have peso deposits at roughly the same magnitude (72 percent), U/KBs only have 47 percent of their assets in loans. This fact is material. Without another avenue for generating revenues, the viability of the thrift bank model must rest in the balance between sourcing retail saving and deploying the same as loans. And as you dig deeper into the loan portfolio, it becomes readily evident that the bulk of the credits lie in consumer finance. From this perspective, consumer finance is therefore at the very crux of what defines thrift banks. The Promise of the Filipino Consumer The good news is that several indicators suggest that the prospects of our consumer finance market remains promising. Like all other jurisdictions in ASEAN, our population growth has actually slowed substantially from 3.35 percent per annum in 1960 to 1.72 percent in 2012.2  Despite this, some 35 percent of Filipinos are younger than 15 years old as of end-2012.   This percentage is much higher than the rest of ASEAN which averages at only 25.8 percent. It is also much higher than those of China, Japan and South Korea which average 17.7 percent, that of North America at 19.3 percent and the euro area at 15.3 percent. What these numbers mean is that the Philippines will see a greater proportion of its population becoming consumers in the next few decades.  This leaves the future market for consumer needs very potent. This is not to say that the current consumer market is not already attractive. World Bank data show, for example, that cellular subscriptions per 100 individuals is already at nearly 107 in the Philippines, higher than the 94 subscriptions average for the BCLMV countries (Brunei, Cambodia, Lao, Myanmar and Vietnam), and the 66 subscriptions for China, Japan and Korea. Our internet penetration rate is not that far off, where we have about 36 internet users per 100 individuals versus the 40 on average in China, Japan and Korea and the 45 users for Singapore, Thailand, Malaysia and Indonesia collectively. But as we develop our young population to be more tech-savvy, one surely expects our numbers to keep on rising. I really do not have to mention the bigger ticket items since this is your area of focus. But to put it on record, we have seen outstanding auto loans, credit card receivables and residential real estate loans booked by thrift banks increase by Php 33 billion, Php 253 million and Php 29 billion respectively over the past three years alone. This translates to annualized growth rates of 15 percent, 14 percent and nine percent respectively. ASEAN Integration and the Consumer Market Ladies and gentlemen, clearly, demographics favor you. Furthermore, ASEAN integration opens up a bigger regional market.   After all, the economic prospects of ASEAN as a whole have always been premised on its retail market. ASEAN has a base of over 600 million individuals in 10 jurisdictions whose collective GDP in 2012 amounted to USD2.27 trillion. While this amount only represents 3.13 percent of the world’s nominal GDP, ASEAN as a collective aggrupation would be the world’s 8th largest economy, only following the US, China, Japan, Germany, France, UK and Brazil.3 Prospects for Philippine Thrift Banks On the whole then, an integrated ASEAN is a natural treasure trove for the consumer finance market. With ASEAN gross saving as a percentage to GDP just above 30 percent while the world is at under 22 percent, the potential for ASEAN is not just its size but also its saving.4 As an industry structured to mobilize retail saving and generate credit exposures to the consumer finance market, the prospects seem tailor-fit for you. In fact, within that framework, the Philippines does stand out even further because of the specific demographic profile that I described earlier. Does this mean then that your corporate future is secured? Unfortunately, the potential that is ASEAN and our own demographic advantages do not, on their own, create balance sheets. There are still strategic decisions to be made and tactical plans to be executed for these identified positives to be reflected as reality on your balance sheets. What is clear at this juncture is that market competition is changing the traditional niches.   Internally, the larger banks are extending their network into areas where smaller banks traditionally operate while banks have increasingly tapped into the consumer finance space. Externally, ASEAN is poised to further integrate under the mantra of an ASEAN that is for ASEAN. Just as we will be exposed to the opportunities of a bigger regional market, our economic prospects will also be targeted by interested regional entities. In both cases, they create competitive pressure for TBs and this, in our view, presents the main strategic issue for thrift banks. Despite all the gains achieved in recent years, you and I will agree that status quo cannot be an option. The ideal solution is to “right size”, getting bigger so that you are better equipped to handle competitive risks while getting smaller in risk exposures where the bank cannot develop a competitive advantage within a reasonable period. This is all about managing risks, a familiar point that the BSP has raised at every opportunity. The difference between today and last year’s convention, however, is that the financial market has re-calibrated towards higher interest rate levels… the much awaited Fed taper has begun and the normalization in easy money conditions has commenced… Furthermore, the ASEAN’s collective resolve to transform into an economic community is upon us. Ladies and gentlemen, the prospects for thrift banks in the Philippines indeed appear to be very strong. But the attractiveness of those prospects is also catching the attention of other banks in the Philippines and most likely, also of banks in the region. You simply have to get stronger to compete in this evolving market. How you become stronger and in what form remains the critical issue before you. I would like to believe that a thriving domestic economy, supportive demographics and your traditional strength in consumer finance should give you a healthy level of confidence as you find your place under the ASEAN sun. These, along with the innate Filipino ingenuity and talent in thriving amid challenges, should serve you well in this journey. I am sure that your resource speakers today will provide various insights and direction during their respective presentations. I then wish you a very productive convention and I thank you for your attention. Maraming salamat po sa inyong lahat. ----------- 1Typhoon Pablo is the strongest tropical cyclone to ever hit Mindanao. The Zamboanga crisis was a 30-day stand-off. The earthquake in Bohol was the deadliest earthquake the Philippines has experienced in 23 years while Typhoon Yolanda is the most devastating typhoon on record. 2All the data in this section are taken from the World Bank’s World Development Indicators 2013 edition. 3Based on nominal 2012 GDP denominated in USD. The ranking is consistent across tables provided separately by the United Nations, the IMF and the World Bank. 4Raw data from the World Development Indicators

Chamber of thrift banks gears up for expansion due to ASEAN integration

MANILA - The Chamber of Thrift Banks (CTB), the umbrella organization of the country's 71 thrift banks, gears up for the upcoming Association of Southeast Asian Nations (ASEAN) Integration by preparing its members for bigger opportunities to expand into new markets, its president said in a news release.

“We want our members to improve their services to our micro, small, and medium enterprise clients as we prepare for a free-market implementation once the integration starts,” said CTB president Jose Teodoro Limcaoco.

“CTB will familiarize SMEs on the integration, what industries will be opened in 2015 and 2016 and make them competitive in the open, integrated economy. To be more competitive, they might need to put up more CAPEX, invest more on infrastructure, or increase manpower,” he added.

The ASEAN Integration comes at an opportune time for local thrift banks, CTB said, as confidence in the industry remained high in the past year, with deposit liabilities growing by 19.3 percent year-on-year to reach P623.431 billion as of December 2013.

CTB First Vice President Rommel Latinazo projects that thrift banks expect the same kind of performance for 2014, when total loans grew by 14 percent.

“We are diverse in terms of focus, some of us are into consumers, (as) the independent thrifts tend to be more of the SME type of clientele. Both these sectors have continued demand for financing and that would be the outlet for the thrift bank industry,” Latizano said.

‘Trickle-down’ from multinationals
“What’s significant to us is that a lot of the loan growth in 2013 came from multinational and top corporates and we believe that there’s eventually a trickle-down effect to the SME sector because the SMEs provide a lot of the products and a lot of the services to these top corporates. The top corporates raised their loan levels in 2013 to expand and you should see the same expansion going forward to the SMEs. That’s why we’re very positive about the prospects for SME lending in 2014 and forward,” Limcaoco said.

In a move to further boost the thrift bank sector, CTB will mount a national convention on March 19, at the Mandarin Oriental Hotel in Makati City.

“The upcoming national convention will help thrift banks prepare for the challenge of market expansion, as well as our MSME market, who stand to be affected by the changes brought about by ASEAN integration,” said Convention Chair Alberto Emilio Ramos.

"The CTB is one with the Bangko Sentral ng Pilipinas (BSP) in its effort to achieve a strong financial system. We support policies and programs of the BSP that address the concerns and challenges surrounding the industry," Limcaoco  added.

Speakers at the national convention will be led by BSP Governor Amando Tetangco, Jr. on “Economic Prospects and the State of the Thrift Banking Industry,” BSP Deputy Governor Nestor Espenilla, Jr. on "ASEAN Banking Integration Framework," Sen. Allan Peter Cayetano on the “Political Thrust of the Senate on the ASEAN integration,” Sen. Paolo Benigno “Bam” Aquino IV, on "How the ASEAN Integration may affect the MSME sector" and "Proposed Amendments to the MSME Law," and Department of Trade and Industry (DTI) Assistant Secretary Rafaelita Aldaba on "General Overview of the impending ASEAN Integration."

source:  InterAksyon

The need for strong financial regulatory foundations in Asean Economic Integration

NEXT year will mark a significant step forward in the framework for the economic integration of the 10 Asean member-countries.  There are several economic benefits that come with economic integration and we have started to see this in the rise in the level of trade of goods and services among the Asean countries.  Free trade within a region of counties and a uniform tariff policy vis-á-vis the rest of the world presents opportunities for economies of scale for both our resource and consumer markets.  Given the 600 million population base of the Asean region, its dynamism and diverse resources, it is expected that more investments will locate in the region to capitalize on the opportunities presented by the process of regional economic integration.  However, the process of economic integration can be quite complex and fraught with many challenges.  One need not look hard for examples of how problems of economic integration can occur.

Some lessons from the European Union

The most well advanced and well-known example of economic integration of countries is the European Union (EU) where it has reached the stage of having a common currency, the euro, for the majority of its members.  They also have a European central bank and a European Investment Bank.  As a matter of fact, it has even achieved some semblance of political integration with the existence of a European Parliament.   However, the recent crises presented by the economic problems of Greece and the other so-called PIIGS countries indicate how serious problems can crop up when countries’ economic performances move in disparate ways.  The key variables to watch are fiscal performance, the status of the banking system, the balance of payments and the unemployment rate.  These variables move interactively and the performance of one directly affects the others.

The case of Greece is the most succinct and serious example of how chronic and substantial fiscal deficits can cause a crisis in a regional economic integration framework.    Greece was simply spending more than it earned and borrowing to finance the deficits until it reached a point that it could not borrow any longer in the normal credit markets.  It was at the brink of default and being kicked out of the EU and it took a very hard political process and painful economic measures to avert this.

The case of Spain was not as serious but it was a much bigger economy.  The fiscal concerns of Spain were notably aggravated by concerns in the banking system.  The drop in property prices in Spain hit the capital of its banks and the Spanish government had to bail them out.  Spain had to borrow this money and it caused increases in its borrowing costs to what was feared were unsustainable levels of interest rates.  It is also a good thing that this concern simmered down due to the measures taken by Spain and the EU and the European Central Bank (ECB).

The problem of Ireland was essentially a problem of its banks being recapitalized by the Irish government.  This resulted in the state needing to borrow to fund the requirements of its banks to the extent that it adversely affected its sovereign borrowing capability.

The need for alignment of the regulatory and open market operation powers of the Central Bank.

The opportunities afforded by Asean integration must be matched by having strong foundations of our economic institutions in both the private and government sectors.  In the case of the financial sector, the Central Bank needs to align its charter to the challenges of cross border issues and systemic risks that may come from within or without the Asean region.  Among the issues to be considered are: competition from financial institutions of the Asean, the expected increase in the flow of investments into and within Asean and the “know your customer” requirements that this entails and the need for more tools to deal with inflationary and deflationary forces that may originate from within Asean or imported into Asean. Proposed amendments to the Central Bank Charter is now in the legislative process in Congress that should strengthen the foundations for the global competitiveness and capabilities of our financial system in Asean and globally.  Among the amendments being proposed are the increase in capitalization to 200 billion pesos, the power to issue debt instruments and organizational strengthening.

source:  Business Mirror Column of Valentin Araneta

Is the country ready for ASEAN economic integration?

THE ASSOCIATION of Southeast Asian Nations (ASEAN) Economic Community (AEC) is scheduled to achieve its integration goals by end-2015. The integration is expected to transform the world’s fastest growing region into a more competitive, unified player in the world economy.

The ASEAN region consists of 10 diverse economies, with a significant consumer market of 620 million.

ASEAN economic growth is expected to slow slightly to 4.7% in 2014, down from estimated 5% in 2013. But future growth is expected to be robust based on a rapidly growing middle class, strong expansion in intra-regional trade and massive investment in public infrastructure and urban development across the region over the next 20 years.

With such high growth prospects, the ASEAN region is expected to attract high foreign direct investments (FDIs) and assistance from foreign governments and financial institutions. But the ability of each member country to attract FDIs would depend on each country’s economic and political state.

In the past, the Philippines’ record in attracting FDIs had been dismal. Among the ASEAN-5 peers, it has received the least FDIs. With the ASEAN economic integration, would this change?

ZERO-SUM GAME
The ASEAN economic integration by end 2015 won’t change the economic landscape overnight. But attracting FDIs is a zero-sum game: FDIs going to Vietnam or Malaysia or to any of the other nine ASEAN countries are FDIs diverted away from the Philippines.

There’s bound to be keener competition among nations. Some countries lag behind because of their poor public infrastructure, uncompetitive tax regimes, protectionist policies, and high costs of doing business. They better fix these disadvantages or perish.

The single biggest disadvantage of the Philippines versus its ASEAN-5 counterparts is its poor state of public infrastructure. Compared to Indonesia, Malaysia, Thailand and Vietnam -- there’s no sense comparing the Philippines with Singapore -- the Philippines has the second worst overall infrastructure.

In terms of port infrastructure and air transport infrastructure, the Philippines has the worst public infrastructure. This is tragic since the country is archipelagic, with more that 7,200 islands, making efficient and reliable sea travel extremely necessary.

Costly and unreliable power supply is a major constraint to the development of manufacturing and tourism sectors. But energy capacities can’t be built overnight.

Traffic congestion imposes huge costs to the economy. A 2012 study by the Japan International Cooperation Agency (JICA) estimates that the annual costs of traffic congestion in Metropolitan Manila is approximately equal to 7% of gross domestic product (GDP).

Yet, improvements in urban transport remain bogged down. The much-vaunted public-private partnership (PPP) program that includes many urban transport sub-projects has been a colossal failure. There is a strong likelihood that none of the large-scale urban transport projects will be completed by the end of the term of President Aquino III.

The Philippines has the highest marginal tax rates for both the corporate profits and personal incomes. This has to be harmonized with its ASEAN-5 counterparts.

The restrictive economic provisions in the Constitution have to be amended.

The Philippines has a long way to go in improving its image as an investor-friendly country. While it has moved up the ease-of-doing-business ladder, it remains to be the most bureaucratic among ASEAN-5 countries.

The ASEAN economic integration is a work in progress. If we want to be benefit from it to the fullest, we have a lot of catching up to do. This challenge should be in the mind of the next President of the Republic.

(The author is Professor of Economics at the UP School of Economics and former Secretary of Budget and Management.)

source:  Businessworld

P24 M allotted for entry of Pinoy professionals in Asean

MANILA, Philippines - At least P24 million has been allocated for the forging of an agreement that would allow doctors and other Filipino professionals to freely practice their profession in the ASEAN (Association of Southeast Asian Nations) region, the Department of Labor and Employment (DOLE) reported over the weekend.

The ASEAN community will pave the way for the free movement of professionals in the 10 member-countries, including Philippines, Indonesia, Malaysia, Singapore, Brunei, Myanmar, Cambodia, Thailand, Vietnam and Laos.

For the next two years, Labor Secretary Rosalinda Baldoz said the government would undertake negotiations and other necessary measures for the forging of the mutual recognition agreement (MRA) for the country’s 46 professions.

“This year, we allocated P7.5 million for the MRA for five professionals, including medicine, dentistry, accountancy, nursing and surveying,” Baldoz said.

She said the government also allotted a total of P16.6 million for the conclusion of an MRA for the remaining 27 professions, adding that the DOLE had forged the MRA for 14 professions as of last year.

The DOLE chief said the government is also hoping to come out within the year with the Philippine Qualifications Framework (PQF) and to be able to develop the required work force competencies.

 

“With PQF in place, it is assured that the qualification issued in the country will be recognized by other countries, which means our licensed professionals can freely practice their professions and get salaries equal to the nationals of host countries,” she said.

Baldoz said DOLE is currently working on the Skills Occupational Shortage List (SOSL) to determine the foreign professionals who would be allowed to practice in the country.

She said the DOLE would consult with stakeholders and would conduct an industry-to-industry inquiry in order to be specific and precise on the needed skills that should be included in the SOSL.
Baldoz said the agency would work with the Technical Education and Skills Development Authority (TESDA), the Professional Regulations Commission (PRC) and the Commission on Higher Education (CHED) in addressing the shortage and shorten the employment of foreign workers in the country.

source:  Philippine Star

Asean economic ministers to meet in Singapore

MANILA, Philippines - The Association of Southeast Asian Nations (ASEAN) economic ministers are meeting this week to outline plans for the year in line with the region’s economic integration in 2015.
Trade Secretary Gregory Domingo told reporters he is meeting with other ASEAN economic ministers in Singapore this week to discuss plans for the year.

 “This (meeting) is to determine what we want to achieve this year. Part of the discussions will be the RCEP (Regional Comprehensive Economic Partnership) and the AEC (ASEAN Economic Community) 2015,” he said.

The RCEP aims to consolidate all ASEAN plus agreements into one regional free trade network.
The AEC, to be established in 2015, would transform ASEAN into a region with free flow of goods, services, investments, skilled labor as well as capital.

In line with the aim of regional economic integration, the ASEAN-6 member states Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand eliminated duties on 99.65 percent of traded goods since 2010.

The other four member states Cambodia, Lao People’s Democratic Republic, Myanmar and Vietnam meanwhile have 98.86 percent of their traded tariff lines reduced to zero to five percent.

For the AEC, Domingo said the economic ministers would focus on services and investments.
He said discussions would also cover banking and financial services.

“These are the difficult areas,” he said.

He noted that while the Philippines may have some restrictions in terms of entry of foreign investors, other countries in the region also have their own set of limitations.

 “The Philippines is not unique in terms of that limitation,” he said.

source:  Philippine Star