IF the purpose of the Asean Economic Community (AEC) is to liberalize trade among its member-nations, will the Philippines benefit from it?
This question was often raised during the Forum on Asean Economic Integration held Friday.
For Philippine Stock Exchange president and chief executive officer Hans Sicat, a good question would be to find out if Asean is a big trading partner of the Philippines that removal of tariff and non-tariff barriers would be advantageous.
Sicat believes integration will be a challenge for the Philippines, as the Asean only constitutes a 17 percent share of its exports. The biggest trading partner of the country is in the East Asia economic bloc, which comprises China, Hong Kong, Japan, Macau, Mongolia, North and South Korea, and Taiwan, constituting 50.1 percent.
“Do we have the right group of economic partners?” he asked participants.
Aside from this, Sicat cited other challenges for the Philippines–it is a small economy, its citizens have a low awareness about the integration initiative, it has limited products and a small investor base.
Still, he believes businesses can overcome the challenges, noting Filipino companies that have already conquered Asean long before integration was conceptualized.
He cited as an example the case for Universal Robina Corp., which has established a foothold in Thailand, Malaysia, Singapore, Indonesia, China, Hong Kong and Vietnam with their array of snack food.
“Even without the grand plan for integration, companies have figured out what Asean means to them,” he said.
Sicat said an integrated financial sector will benefit from reduced banking costs, improved efficiency, increased mobility of savings and regional banking stability. It is not, however, without risks. Integration, he said, could expose the financial sector to spillover effects from foreign banks, increase its volatility due to speculative activities and lead foreign banks to overshadow domestic banks.
For Sicat, the key to implementing the integration will be to have political will, implementation arrangements, coordination and resource mobilization, capacity building and institutional strengthening and consultations with the public and private sectors.
On their end, Sicat said the PSE has been preparing by collaborating with other exchanges in the region and coming up with other products and services.
Sicat is confident in the country’s position, citing upbeat investor confidence, improved macro environment and continued reforms from the government. After securing two investment grade ratings, he said a third one is on the way after representatives from Moody’s visited their offices two weeks ago.
He also said that the PSEi has consistently been included in the World Federation of Exchanges’ best performing indices since 2010 while it topped Bloomberg’s riskless return ranking among Asean indices last year. CNN Money also identified it as the fifth hottest stock market in the world last April.
Because awareness of the initiative is low, Sicat hopes the government will continue to push the topic and discuss it to create awareness and make stakeholders prepare for it.
Published in the Sun.Star Cebu newspaper on August 14, 2013.