ASEAN Economic Community

The ASEAN Economic Community (AEC) shall be the goal of regional economic integration by 2015.
AEC envisages the following key characteristics: (a) a single market and production base, (b) a highly
competitive economic region, (c) a region of equitable economic development, and (d) a region fully
integrated into the global economy.

The AEC areas of cooperation include human resources development and capacity building; recognition
of professional qualifications; closer consultation on macroeconomic and financial policies; trade
financing measures; enhanced infrastructure and communications connectivity; development of electronic
transactions through e-ASEAN; integrating industries across the region to promote regional sourcing; and
enhancing private sector involvement for the building of the AEC. In short, the AEC will transform
ASEAN into a region with free movement of goods, services, investment, skilled labour, and freer flow of
capital.

What will be the benefits of an Asian Economic Community?

Potential of an Asian Economic Community

There is a growing recognition of the importance of intensive economic integration

at the pan-Asian level in the region and that the opportunity cost of not going in for
intensive economic integration are substantial. There is the realisation that stimulus
for future growth in the region has to come from within, given the trend of
formation of regional trading blocs in rest of the world. Substantial
complementarities exist between Asian economies that remain to be exploited for
their mutual common benefit. For instance, while the region has economies that are
surplus in capital resources, there are also economies, which have inadequate
domestic savings for rapid development. The region is similarly characterised by
complementarities in the demand and supply of other resources such as technology,
and skilled manpower. Over the last five years, the regions dependence on outside
regions in terms of trade, investment, and banking finance has increased. The
excessive dependence on countries outside the region has brought in
vulnerabilities. The East Asian economies that were recovering from the Crisis of
1997 in 2000 again got into the slowdown due to the US economic recession
between 2001-02. The global economic outlook is highly volatile and currently faces
downside risks arising from exchange rate re-alignments, rising oil prices, rising
protectionism, among other factors. There is also substantial under-utilised capacity
in engineering and construction industries in Japan and Korea and the lost output
because of under-utilisation of capacity could be of the order of 10-15 per cent of
the GDP of the region or about a trillion dollars a year. A more intensive cooperation
for matching the under-utilised capacity in some countries of the region with unmet
demand in others, could go a long way in putting the region on a high growth
trajectory and help Asia to re-emerge as a centre of gravity in the world economy.

The sub-regional attempts at regional cooperation that have been initiated, such as
those under the framework of ASEAN and SAARC are unlikely to exploit the full
potential of the regional economic integration in Asia. This is because the extent of
complementarities is limited at the subregional levels. It is clear from the fact that
trade of South Asian countries with the East Asian countries is much larger than the
intra-regional trade. The same is the case with ASEAN. At the pan-Asian level, the
diversities in the levels of economic development and capabilities are quite wide,
thus, providing for more extensive and mutually beneficial linkages. The diversity in
economic structure provides its own indigenous capacity and markets for dynamic
industrial restructuring within the region on the basis of flying geese patterns. It is
for this reason that the success achieved so far, from the current subregional
attempts at cooperation or from the truncated regionalism as it has been termed,
have been meagre.

The Asian region comprises some of the fastest growing economies in the world.
Together, they form a huge market that is growing faster than any other region in
the world and could form a vibrant regional grouping that would be roughly of the
size of the EU in terms of GDP, will have larger magnitude of trade than NAFTA and
international reserves bigger than those of EU and NAFTA put together. The
formation of an Asian Economic Community (AEC) will also help the region to play a
more effective role in shaping a world trading and financial system that is more
responsive to its needs.

Asean integration in 2015 and its implications on labor

BY 2015, the 10 nations that make up the Association of Southeast Asian Nations envisions an Asean
Economic Community, which will establish a highly competitive single market and production
through the integration of their economies.

The question is, are we prepared to meet the competitive challenges in terms of integrating with other
countries in the region?

Some groups believe that the Philippine may not yet be out of the race to promote integration of our
economies, since the country somehow seems unprepared to meet the competitive challenges, for
instance, when trade barriers are lifted to allow for the free flow of goods and services in the region.

Heres a bit of a background for those of us who have not followed this issue closely.

Philippine Representative in Taiwan Antonio Basilio cited the Asean Agreement on the Movement of
Natural Persons (MNP), which he said, is one of the series of steps leading to the establishment of the
Asean Economic Community (AEC) by 2015.
The MNP, he said, is a subsidiary agreement necessary to the implementation of the Asean Framework
Agreement on Services (AFAS) as it covers the so-called Mode 4 in the delivery of services.

It covers business persons, Basilio said, noting that the MNP Agreement is specifically limited to
business visitors, contractual service suppliers and intra-company transferees.

Hence it covers skilled workers, professionals and executives, and only for their temporary entry, he
said.

The MNP Agreement, on one hand, does not allow for permanent entry by such persons, nor does it
allow for movement of all persons [e.g., unskilled labor] even on a temporary basis, he added.

In looking at its impact on labor in the Philippines, Basilio said that we should take into account that it is
tied up with concessions made under the Asean Framework Agreement on Services.

The impact will primarily be on skilled labor, Basilio said, citing that it is reciprocal which means
that our country will also allow service providers from other Asean countries to send their skilled
workers to the Philippines in the course of rendering a contracted for service.

Since we have an advantage in terms of the number of skilled workers [able to speak English] and lower
wages than some Asean countries, it is more likely that there will be a net outflow in our favor, Basilio
explained.

It likewise does not prevent Asean service providers from hiring Filipinos to perform services not only in
the Philippines, but in other Asean countries as well, he added.

Thus, Basilio noted, this integration of Asean economies will provide opportunities for our skilled
workers to work in other Asean countries.

However, he said, some jobs may require specific skills or qualifications such as lawyering, medical
services.

So it is even more important now that there be mutual recognition of professional standards and that our
curriculum are in consonance with Asean-wide requirements, Basilio said.

For unskilled workers such as factory workers and household help, the usual labor and immigration laws
will apply, he added.

More opportunities
According to Budget Sectrary Florencio Abad, there are and will always be differential impacts across
countries arising from the integration of the Southeast Asian economies.

The Asean region is a huge market; it is home to many emerging markets, Abad said, citing that there
would be even more economic opportunities, but the Philippine government still has a lot to do.
For our country to properly gear up for Asean 2015, the government must continue a structural
transformation of the economy to make it more investment and industry-led, he said.

The free entry of goods and services across economic borders can only mean more economic
opportunities for countries in the region and therefore more opportunities for employment and
livelihood, Abad said.

The challenge for us in preparation for this new regime is to sharpen our competitiveness and facilitate
the ease of doing business in our jurisdiction, he added.

Neo-liberal policies
While the government perceived the overall impacts will be positive, some labor groups consistently find
the regional economic integration causing a drag on our growth and development.

Kilusang Mayo Uno (KMU) Chairman Elmer Labog described the 2015 Asean integration as a further
implementation of neo-liberal policies.

He explained that it is the consolidation of wealth and power of the multi-national corporations as well
as those on the Forbes list.

It will not redound to the distribution of any gains in growth to workers and poor people, Labog said.
It will likewise be a signal to repress people who would go against such an exploitative arrangement.

The KMU chair said that this integration will also lead to more contractual workers with much lower
wages and benefits.

May create more employment but what kind of employment? Labog said, citing that this will only
enhance the cheap Labor policy of the government, which he said, will far surpass the 5,000 a day
exodus of labor at the present.

Obviously, the Philippine government has prepared to meet such 2015 Asean integration by putting in
place the two-tiered wage system which will allow wages much lower than the current regionalized
scheme, Labog added

Labor becomes vulnerable

With the integration of the Southeast Asian economies, the countrys labor becomes vulnerable,
according to the Federation of Free Workers (FFW).

Antonio Asper, FFW vice president for external affairs, said that they are very wary about Asean 2015
Economic Integration.

Down to bedrock, the exercise actually means liberalization, deregulation and privatization three
policies that in the past, as it is still, result in a race to bottom in labor standards, in the displacement of
labor, and in weakening the unions, Asper said.
The Department of Labor and Employment (DOLE) through the National Tripartite Industrial Peace
Councils, he said, has organized consultations between trade unions and representatives of employers
with various agencies of government about Asean and the planned 2015 Economic Integration.

This we appreciate, Asper said, but the labor groups are concerned that the continuing race to the
bottom in labor standards and displacement of labor arising from the policy triad will be accelerated by
the Asean 2015 Economic Integration.

There seems to be no strategic development plan to mitigate our worries and to address our concerns,
Asper said, citing in particular, the sugar industry, which he said, might be severely affected while rice
importation might intensify as a result of the economic integration.

Also, he noted, the economic integration by 2015 might place stumbling blocks to the planned revival of
industries and manufacturing.

The problem is that no credible studies have been made to identify the winners and losers come 2015
and no social safety nets are in place to help the losers recover and become competitive. If then, labor
displacement will most probably happen, Asper pointed out.

The KMU official, on one hand, recognized the free flow of skilled labor and professionals in Asean as
a result of the economic integration gives the country and its labor certain advantages.

However, at the Asean level, the preparations are still incomplete: the instruments to enforce the Asean
Declaration on the Rights and Protection of Migrant Workers are not yet there; nor will they be there by
2015, Asper added

He also cited over-reliance on remittances from migrant workers, which he said, increases the social
downside in broken families and exploitation of Filipino labor in host countries.

We contend that without an industrial plan being implemented that will employ more workers in the
Philippines, migrant work can not really be a choice, Asper added.

Inclusive growth
Presidential Communications Secretary Herminio Coloma Jr., meanwhile, said that the Aquino
government is still committed to achieve win-win outcomes for all.

The expansion of the economy aims to create more jobs and livelihood opportunities, and contributes
meaningfully to poverty reduction, he said.

Hindi natitinag ang administrasyon sa layunin nitong ibsan ang kahirapan at iangat ang kabuhayan ng
mga Pilipino. Iyan ang konteksto ng pagsulong ng ekonomiya ng bansa na sanay kahanay ng mga
kaganapan sa Asean. Kapakanan ng Pilipinas at mga Pilipino ang dapat mangibabaw, he said.

Nararamdaman na ito dahil sa patuloy na pagpapahayag ng positibong saloobin sa pamumuno ng

Pangulong Aquino, Coloma added
President Aquino did promise to bring about inclusive growth as he vowed to provide thousands of
stable jobs in the remaining three years of his term.

This is what our government has chosen to do. We cannot have a society where a few flourish and the
rest just make do with crumbs. We must have inclusive growth, the President said.

In order to empower the Filipino people, Mr. Aquino also noted that the government needs to maximize
opportunities.

And while no one can guarantee outcomes, I believe it is incumbent upon government to provide
meaningful opportunities to individuals, and an environment conducive to empowering our fellow
citizens to seek out and maximize opportunities that come their way, the President added.