The ten-member Association of Southeast Asian Nations (ASEAN) has set 2015 as the target for creating a single regional economic market known as the ASEAN Economic Community. ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, a market of about 600 million consumers.
By then, it will be easier for Philippine companies like Jollibee and San Miguel to put up subsidiaries or branches in any country in the region. Our professionals can also practice in Kuala Lumpur or Hanoi; Asean nationals can do the same in Manila and Cebu.
According to Wikipedia, a single market is a type of trade bloc composed of a free trade area for goods, with common policies on product regulation, and freedom of movement of the factors of production (capital labor), enterprise and services between the members. The physical (borders), technical (standards) and fiscal (taxes) barriers among the member states are removed to the maximum extent possible. These barriers obstruct the freedom of movement of the four factors of production.
A common market is a first stage towards a single market, and may be limited initially to a free trade area with relatively free movement of capital and of services, but not so advanced in reduction of the rest of the trade barriers.
The European Economic Community was the first example of a both common and single market, but it was an economic union since it additionally had a customs union.
As a single market, the AEC will therefore be characterized by the free flow of goods, free flow of services and the free flow of investments. There will just be one missing link in the arrangement compared to Europe. In that year, the region will not yet have a common money like the Euro. That will come later.
The most important part of integration is the absence of import or export taxes. No other barriers to trade except for a few things under each country’s sensitive list which, in our case, is rice. And our customs administration practices will be harmonized in just one simple, unified system.
The Philippines has been given until the end of this year to simplify its customs administration under the evolving set-up. We have barely eight months to beat that deadline.
We have done some of our homework, including acceding to the global rules on customs administration under the Revised Kyoto Convention. Congress is also aligning our tariff and customs code to international standards and, if the impeachment hearings of the Chief Justice don’t drag too long, our lawmakers may just succeed in enacting a modern customs code before they again go on holiday recess.
The equally difficult task of changing the “mano-mano” system of handling incoming and outgoing shipments in our ports to one that is internet-based and almost paperless has been unrolled but not yet debugged. In particular, the E2M (electronic-to-mobile) or automated, integrated system of processing export documents is only being started, while the automated processing of imports has been in adoption for some time.
Our guess is our customs officials won’t be able to set up the fully integrated National Single Window for connection to ASEAN by yearend. Automating export processing also remains a long shot. If that happens, and only import documentation qualifies as part of regional harmonization, the Philippines will be a good destination for other members’ goods but not an easy source of products. That will be another obstacle to faster growth for Philippine exports.
There is even a bigger hurdle our industries need to take. If one enters into regional trade and investment partnerships, it is assumed domestic industries are robust enough to produce goods and services with economies of scale or in big volumes. Except for a handful of big corporations, most of our exporters and other enterprises pining to get into the regional trade games need various support to compete. As Trade Secretary Gregory Domingo put it, we need to implement more reforms and improve on our competitiveness to maximize the benefits of ASEAN 2015.
We have three more years to prepare for this ASEAN Trade Olympics. It’s crunch time but everyone is hoping we can get to the finish line in time.