How to reap the benefits from APEC, ASEAN Integration

Core — Benjamin E. Diokno

Unknown to many, after the Asia-Pacific Economic Cooperation (APEC) Economic Leaders meeting on Nov. 18-19 meeting in Manila, about half of the participants in the APEC meeting will converge in Malaysia for the annual Association of Southeast Asian Nations (ASEAN) summit. And before the APEC meeting in Manila, a G20 meeting will be held in Turkey attended by leaders of the developed countries with Indonesian President Joko Widodo, representing developing countries.

Before that, there is the World Trade Organization and a host of other regional organizations. The reality is that annual leaders’ meetings don’t just happen on the designated dates. They are preceded by a year-long series of senior official meetings on practically all issues one can imagine: foreign relations, trade, small and medium enterprise, disaster management, food security and blue economy, climate change, and so forth and so on.

One gets the feeling that these regional groupings — and those that will emerge in the future — are concocted by senior diplomats and trade officials to keep the music playing. The more meetings and conversations take place, the more opportunities for senior government officials to travel abroad.

Unfortunately, annual meetings are not all leaders do. The more foreign meetings they have to attend, the less time they have to address their domestic problems such as joblessness, poverty, crumbling public infrastructure, peace and order, outmigration and immigration, natural disasters, and so forth and so on.

Don’t get we wrong. I think membership in APEC and ASEAN has its own advantages. It provides an opportunity for a member economy to push its economy to the edge of its possibilities frontier.

But that’s precisely the point. An economy that is willing to invest time, money, effort, and adopt the “right” policies (consistent, predictable, and unbiased) is likely to reap the benefits of membership in such economic groupings. An economy that is willing to just join the conversation, but not work, would benefit the least.

In other words, benefits from membership in a regional bloc, no matter how economically fast growing that bloc is, do not materialize automatically. Individual members have to do their homework. The economy has to upgrade its public infrastructure, invest in human resource to ensure a steady supply of intelligent and health labor force, streamline government procedures to minimize the cost of doing business, control corruption, honor contracts, pursue consistent public policies, and maintain peace and order.

In the end, a country has to produce tradeable goods that are competitive with the rest of the world.

The ASEAN consists of 10 heterogeneous economies with a combined gross domestic product (GDP) of $2.4 trillion. It has a young population and its middle classes are expanding. ASEAN as a bloc is open to trade and foreign direct investment, though some countries export more than others. In 2014, total trade amounted to $2.6 trillion, of which intra-ASEAN trade was $620 billion.

These aggregative indicators are impressive but they mask the Philippines’ weaknesses. The country is the poorest among ASEAN-5 countries, with per capita income in of $2,862, as of 2014. Compare this with Singapore’s $56,287, Malaysia’s $11,049, Thailand’s $13,883, and Indonesia’s $3,524.

The Philippines also is the poorest among ASEAN-5 countries. In 2012, 25.4% of its population (or one of four) fall below the official poverty line, compared to Thailand’s 12.6%, Indonesia’s 11.3%, and Malaysia’s 1.7%. To date, the Philippines’ poverty level remains unchanged.

The more “open” the economy, the greater the likelihood that it would benefit from its membership in APEC or ASEAN.

But the Philippines is second to the most closed among ASEAN-5: its imports plus exports in goods and services in percent of GDP (2013) was 55%. This is way below Singapore’s 351%, Malaysia’s 138% and Thailand’s 132%. It is only slightly better than Indonesia’s 45%.

In terms of intra-ASEAN merchandise trade, the Philippines came in the last at 9%, compared to Singapore’s 66%, Malaysia’s 35%, Thailand’s 25% and Indonesia’s 10%. Put differently, the Philippines benefit the least in terms of intra-ASEAN merchandise trade.

The proof of the pudding is in the eating, as the saying goes. Sadly, for the Philippines, foreign direct investors are not biting. As percent of GDP, the Philippines has attracted the least foreign direct investments (FDIs) at 1.1% (2010-2012 average). By contrast, Singapore has lured 28.9%; Thailand, 6.4%; Malaysia, 6.2%; and Indonesia, 4.0%.

Worse, FDIs coming to the Philippines from with ASEAN were even more dismal at 0.3%. Singapore has attracted 2.6%; Thailand, 1.6%; Malaysia, 1.2%; and Indonesia, 0.7%.

The unmistakable message for Filipino policy makers is: if you want to reap the benefits from APEC, ASEAN and other alphabet soup organizations, you got to work for it. Do your homework.

For the Philippines to be competitive with its more affluent ASEAN neighbors, its policy makers have to fix the country’s known deficiencies. For the Philippines to be able to catch up with its neighboring countries, it has to fix these deficiencies now and in a massive, sustained, way. The longer we procrastinate, the more we’ll fall behind.

Benjamin E. Diokno is a former secretary of Budget and Management

Source: www.bworldonline.com