Asean integration

“. . . [T]he Millennium Challenge Corp. (MCC) of the US has remained non-committal if it can come up with another package for the Philippines but instead urged the private sector to do its share by investing more,” Manila Bulletin, 19th Oct 2012. Another Manila Bulletin article that appeared on the same date reads: “Power Sector Assets and Liabilities Management Corporation (PSALM) extended transition supply contract (TSC) with Manila Electric Company (Meralco) will be expiring this December . . . [I]f PSALM will not take calculated steps on how it will market or treat its un-contracted capacities, it could be a risky option for consumers as increased spot market exposure could trigger price hikes especially during the summer months . . . “

Are we ready for Asean integration? We know how similar initiatives unfolded in North America and Europe, and even in Asean after 1992 – when we lost some MNC manufacturing to our neighbors. Economies of scale make MNCs locate manufacturing facilities where they would yield the optimum if not maximum benefits; and in an integrated Asean, the most cost-efficient country would always win out. [And we still don’t have a coherent energy plan?] It is beyond friendship, it is about economics – “business is business.” Unfortunately, PHL is indeed Shangri-la (quoting American friends) and who would want that quality of life changed? And so Juan de la Cruz is simply cool? And that’s not necessarily a problem. The problem is when we take a challenge for granted.

Now that the Asean integration is around the corner, the alarm bells are ringing louder. If even our largest banks – and for many years we saw them as paragons of success – are now admitting they would be dwarfed by the integration, what more of our much smaller enterprises? Still, blogs like this are a pain in the neck: nobody wants to be at the receiving end of unsolicited advice. And which is why I find myself learning a lot from my Eastern European friends. Their desire to seek ideas and experiences from the outside says they’ve understood and accepted that they could use help – yet they remain proud as a people. They saw value in the efforts of the West to assist them in their accession to the EU. Still just like what the MCC said, the private sector had to do its share of investing. And this especially applies in the case of PHL given that we’re lagging in investments. And to be hardest hit in the meantime are our much smaller enterprises – which “employ 70 percent of the population,” writes Florangel Rosario Braid, Manila Bulletin, 24th Oct 2012.

Small enterprises thrive when the ecosystem is geared to innovation and competitiveness. In the Japanese or Korean model, for example, major enterprises sought to become global players and the smaller enterprises they spawned (as auxiliary industries) developed an innovation culture given their symbiotic relationship with the former. In contrast, our small enterprises are more like livelihood undertakings. The challenge goes beyond the conventional support to MSMEs that we may be familiar with. We need to create that larger ecosystem that has the requisite infrastructure – from power generation and beyond – and an industrial base of strategic industries that is sustained by investments, innovation and competitiveness.

In the meantime our industry worries that populist legislations supposedly to protect workers would create a bigger problem not only for them but eventually for the workers themselves. (Similar to the fallouts we saw in land reform and the unwitting bias of minimum wage legislations to unskilled as opposed to skilled work?) Not surprising, again, because our industry is meant to market to poor Juan de la Cruz and thus low or affordable price is the mantra. And precisely because of this paradigm we have yet to develop the inquisitiveness that spurs innovation and competitiveness. And our efforts in raising our competitiveness rankings to date are still at the level of “ease of doing business” – where the real barriers include the absence of a culture of efficiency and productivity, our hierarchical culture that feeds on cronyism and corruption and the restrictive economic provisions in our charter – and have yet to move up to the heart of competitiveness, that is, of innovation.

Indeed we must ring the alarm bells. Asean integration will not be easy – our optimism notwithstanding – given the outmoded paradigm and model we see as virtues?