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Reaching the ASEAN Economic Community 2015: Impacts on the Philippines

Gideon Noel S. Valera
Charlie Li
De La Salle University

ASEAN countries desire to have a better standing in World Health Organization (WHO) by means of
creating its own community. This community, which is expected to be implemented by 2015, focuses on three pillars
namely the ASEAN Security Community, ASEAN Socio Cultural Community, and the AEC or ASEAN Economic
Community (Severino, R.C. & Menon, J., 2013). AEC circles its aim on the foundation of single market and
production base which will allow the free movement of goods, services, investment, capital, and skilled labor. This
gives an edge in the Philippines in terms of boosting its economy status especially on this instance that the
Philippine performances ranking in World Bank was deteriorated from 141 th in 2009 to 144th in 2010. In line with
this, ASEAN Economic Community (AEC) gives a big impact and challenge in the country in terms of its
competitiveness and standing over ASEAN countries, trading of goods and services on the foreign and ASEAN
members, and the free flow of workers and hiring opportunity.
The first impact of AEC in the Philippines is the competitiveness of the country. The rate of commitment of
ASEAN members in every policies, regulations, and liberalization of AEC defines the competitiveness of each of
the country. The higher the rate of commitment equals to a higher competitiveness. In order to track the progress of
member states in applying the commitments, ASEAN Economic Community developed an AEC scorecard. The two
major goals of these scorecards are to supply superiority and capacity signs of approval, implementation,
transposition into the rules, directives, and obligations and vows inside the timeframes mentioned in the blueprint of


AEC; and to track the agreements implementation and members accomplishments in AEC strategic schedule
(Balboa et. al, 2013).
The Philippine scorecard attained a 45.71% score in terms of the priority action project of AEC showing that
32 were implemented out of 72(the ASEAN secretariat, 2012). The score can still progress through desired
commitments under transport for at least eleven protocols are still pending for executive ratification. In terms of
single market and production base consisting of free flow of goods, services, investments, and priority integration
measures, Philippine was already highlighted. Philippines achieved the full implementation of Effective Preferential
Tariff on ASEAN Free Trade Area (CEPT-AFTA) scheme, and tariff of the goods except on the highly consumed
products, particularly rice. Also, the rules of origin had been revised and approved and now being implemented
together with the ASEAN Single Window of Bureau of Customs. Bureau of Product Standards already established
ASEAN reference laboratories which will be used for further implementation and approval of ASEAN Common
Technical Dossier and ASEAN Harmonized Common Technical requirement. On the free flow of services,
Philippines scorecard says that the country had completed the conference and approved the ASEAN Mutual
Recognition Arrangement (MRA) on accountancy services, medical practitioners, and dental practitioners as well as
the collection of record of barriers to services. On the other hand, the development of automotive is already on the
region, ASEAN portal for ASEAN automotive machineries and ASEAN folder on automotive products are also
bring developed.
In line with this, the trends of the Philippines showed that CEPT-AFTA, a project that aims the export and
import of products in the country to be absolute zero in tax is greatly implemented in the country. The average tax
rate of free flow of goods had been almost removed or lowered to 0.1, which lately affects the agricultural tax rate of
the country bringing it down to 0.5. Because of these positive effects, the country could be one step closer on reining
the economic pyramid and has the potential to achieve the expectation of AEC.
However, the sluggish speed in ASEAN financial integration may lead to a lacking market setting, nonstrapping ASEAN trade dealing and the uselessness of the development of State-led. Tantikulananta (2013) said that
the pursuance of economic policies varies on the commitment of the officials to regional economic integration. In
this sense, tax walls and economic limitations were implemented by the politicians because of the so called national
interest. This is merely known as the Political Economy Considerations. Based on this event, Tantikulananta (2013)


stated that this defensive measure tends to block the ASEAN Economic Integration. One example of this measures,
which been also called as negotiated protectionism by Ravenhill (2008) was the removal of traded sugar from the
China to the Philippines. This has been made in order to prioritize the local sugar industry in the Philippines.
Another peak of the political economy is the business on Philippine Aviation (Balboa et. al, 2010).
Philippine Aviation bazaar which is almost conquered by the Philippines Airlines (PAL) is rolling on the market
unevenly. According to Aldaba (2008), PAL has its own given biases by the government corporation in terms of
incentives, and unconditional assurances. This will cause the new applicants and investors to compete rigidly.
Terminals and airports are almost dominated by PAL which is also a hindrance in terms of securing the possession of
airport. In line with this, Civil Aeronautics Board (CAB) was being monitored in the failure of collecting the
regulatory payments of PAL. CAB, an agency that is created to regulate and supervise the aircrafts, was blamed as
bias to PAL. Philippine Airlines does not only disregard the desires of Overseas Filipino Workers (OFW) in going
back to their homeland for an efficient time, cheaper tickets, and small area of flights but also shunned out the
settlements of the Philippine to the tourists, and other linkages in regards to business.
Aside from Philippine Aviation biasing, another weakness is the Philippine Power Sector (Balboa et. al,
2010). There are other countrys ownership and private sectors that transmit and divide the energy requirement of
the Philippines through the Electric Power Industry Reform Act of 2001 (EPIRA). This will cause the feeling of
doubt not only to the authority and reliability of EPIRA but also to the Energy Regulatory Board or ERB who
regulates the market in regards to energy and arrests the fault maker agents. Senate Economic Planning Office or
SEPO (2009) stated that there is already a case of biasing in other allied companies of a large power distributor in
terms of subsidizing and inefficient firms which results to a higher energy price hike. On the other hand,
telecommunications businesses had the cases on misusing their power especially those companies who played on the
game dominantly. Example of this is the Philippine Long Distance Telephone Company (PLDT). They had been
accused of using its market power by interfering interconnection, having unequal access of communications, and
greedy pricing (Balboa et. al, 2010).
Infrastructures are also very important in developing the country since it helps to attract more assets and
lessen its production costs. According to World Bank, middle country in East Asia should spend a minimum of five
percent of their Gross Domestic Products (GDP) on infrastructure in order to survive for the next ten years. While


the Philippines only accounts around half of the breaking point or 2.8 percent of the GDP the government are still
inefficiently spending these financial resources which should be used in developing better infrastructures. In this
case, it is a huge challenge for the country to adopt the changes of the upcoming ASEAN Economic Community.
Also, the financial institute of the country was affected on the 2008 global financial crisis which weakened the
worlds economy and prolonged development progress. This phenomenon causes the country to experience some
financial inaccuracy that delayed some financial association. It also created more tax dismay and it eventually gave
birth to insufficient financial spending. To be able to recover from such crisis, financial institutions should firm their
rules by creating reliable institutions that will measure the ability of the country in terms of its income capacity
using the developmental programs (Balboa et. al, 2010). The expenses of the Philippines will be wholly known
which pushes the organizations on this field to release such support on capitals and money.
The second impact of AEC in the Philippines is its business trading in services and goods (KPMG, 2014).
The ASEAN Economic Community (AEC) blueprint aims to attain the economic integration by 2015. To be able to
fully implement this, the ASEAN member countries have opened up their economies to increase their investments
and have increased professional oversea workers within the region. However, Asian Development Bank or ADB and
International Labour Organization (2014) shows that the ASEAN are lacking in professionals such as engineers and
architects which results in the slow process of developing the transactions in services such as implementing of
foreign honest participation in local businesses as well as diminishing of restrictive government. To fully control the
transaction service section, basic factors such as investing and landholding should be minimized on restrictions.
One restriction is the capital (Nikomborirak, D. & Suppunnavadee, J., 2013). It is very critical in building
businesses overseas. Investors usually avoid investing on countries with restrictions on an equal holding of stocks
and operations. ASEAN Economic Community, although having easiness on the constraints for foreign investors,
wide walls still are in between. It has now discovered that the regulations in the priority service sectors are not
helpful in promoting criss-cross investment by other countries due to some barriers that are said to be off the
negotiating table. Some of the problem including on this are the independency of some service sectors, dominancy
of other enterprises over others, and the domestic policies.
Another restriction is the landholding of the outsiders (Nikomborirak, D. & Suppunnavadee, J., 2013).
Though foreigners are open to invest on the country legally, there is only a little inducement and assurance of


ownership for foreign citizens once that their business has broken or has been proven illegal. In ASEAN, there is a
big constraint on the foreigners in terms of possessing a homeland or even a business one. In the Philippines itself,
Filipinos as well as the companies with an equal share of at least sixty percent can possess land. Some foreigners can
also have their lands if it will be used for establishing a business with the help of National Development Corporation
or NDC.
However, Nikomborirak and Suppunnavadee (2013) suggested solutions to these restricted problems. One
of the solutions is the concentration on group of services than on a one-cell service sectors. It is a good action on the
problems and restrictions on the capital. Discussing the problems regarding the dominancy of other corporation and
pushing an equal fighting in the market is a good starter march on the issue of dominant role of venture. It is a must
to have a prescribed regulations implemented by the government on the market especially when private sectors and
service sectors are involved. One example of this is the telecom reference paper of World Trade Organization
(WTO) that aims to access on the private and service sectors of 80 states who are in the market.
Assessing the problems of restrictions on landholding, Nikomborirak and Suppunnavadee (2013)
discovered that new terms and conditions on the investors is a good solution. Investors from ASEAN countries may
be given a wider and more open hand than other investors coming from other countries. ASEAN members may rent
in the country for a longer period of time as well as letting them to possess a land that will be used for manufacture
Above all, tariffs and non-tariffs barriers indicators are the best discovered solution not just in ASEAN but
also in the Philippines (Balboa et. al, 2010). As the ASEAN Economic Community draws near, the tax burden is
constantly removed, and the restrictive trade slowly eliminated. ASEAN and East Asia are planning to create an
enormous open market that will prepare the country for this upcoming target date after which creating an open
business environment that would promote easy access to trades and transactions between economies. As these major
events are being planned out, the country must constantly catch up on the expectancy by improving the competitive
side and by making the country a more pleasant and open place for transaction and investment destination. One of
the most important areas that Philippines must take priority is the Customs procedure. According to the World
Economic Forum (2010), the Philippines are perceived to be the most inefficient, corrupt, and costly customs service
in East Asia. The most effective solution to lessen the corruption of the interface customs transaction is by a single


window handed out by the BOCs national. Also, the weakness of the Philippines in terms of free flow of investment
and freer flow of capital has been revealed on the countrys scorecard. These weaknesses had sprout out because of
the insufficiency of the government to implement the policies and regulations given by ASEAN Economic
Community. Philippines is one of the countries in the region that gives big restrictions to the foreigners with the
inclusion owning a business and possession of some infrastructure (Balboa et. al, 2010). The country needed a big
requirement unlike in Hongkong and Singapore who have nothing.
The ASEAN Economic Community (AEC) was also committed on some human progress. One of these is
the increased of demand for some skills. A background paper from the ASEAN Economic Community 2015:
Managing integration for better jobs and shared prosperity (ADB, 2014) approximated the future request of job
hiring on the ASEAN members including the Philippines. The study stated that 41%, equivalent to 14 million half
workers may increased up to the year 2025 for those high-skilled workers such as engineers, architects, and
accountant. In the Philippines, the increase of the ASEAN impacted the countries by increased of 60% or 4.4
million. In terms of medium-skilled workers such as nurses, clerk, and office workers, 38 million jobs will be
opening up which is equivalent to 22% growth of the region. These phenomena will result to the allowance of lowskilled workers such as construction workers, janitors, and carpenters. It can be seen that by directly increasing the
high-skilled and medium-skilled workers, the low-skilled workers will indirectly be increasing. However, the job
hiring opportunities entails strong education and well trained certificate as well as a strong social policy. In order to
attain such skills and certificates, increase access to better quality education is a must (ADB & International Labor
Organization, 2014). To substantially increase better education, AEC will increase the supplies of products needed
by the student to fully take advantage of the K-to-12 program which was reform to law last July 2013. This
expanded basic education from ten to twelve years will be able to help students on enhancing their analytical skills
and improve trainability upon graduation. On the other hand, the Responsible Parenthood and Reproductive Health
Act which was signed last December 2012 aims to give the parents a better knowledge in accessing sexual health
education, like birth control that can be decelerating population growth and ultimately decreasing labor market
pressure. Both of these measures are being encouraged and strengthen by the Pantawid Pamilyang Pilipino program,
a cash transfer program that improves the health and education learning of the Filipino citizen which has yielded a
positive result.


In summary, ASEAN Economic Community (AEC) was already on a long journey, and has its right to
govern ASEAN by 2015. However, based on the Philippine economy standing especially in the Bureau of Customs,
the country will be entangled as this was being implemented. What would be the best action? Philippine political
biases and structural problems of the country are explained as depiction of the Philippines. On this sense, the
country requires multi-disciplinary actions that are definitely on-laws and following the regulation with the right
credibility and considerations. Also, a tied-hand and fair works of custom would be the most efficient action for the
reason that the flow of goods and imported products from other countries will be more accessible by the country. It
will also open a cheaper product and a more competitive local product which will increase the standing of the
Philippine economy over other ASEAN members. In regards to the free flow of workers, K-12 program of DepEd is
a good start on the changes. High-skilled education is the in-demand workers of AEC and it is very attainable
through the said program. With the completion of these actions, a better reputation of the country will be so
attainable not only on the region but on the globe.

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