Must Filipinos worry about the Asean Integration 2015? Or should they see it as an opportunity for growth and progress for the nation?

In the first Asean summit held on March 27 and 28 in Manila, which hundreds of participants from the business, professional and academic sectors attended, these questions were posed and answered, or at least, answers were attempted.

The Asean Integration, which was a treaty signed by the ten Asean member states in 2007, will be in force in 2015 with the objective of creating an Asean that can compete in the world economy as a single market and production base. What does this mean? There will be a free flow of goods, that is, tariffs will be eliminated and non-tariff barriers will be removed. There will be a free flow of investments and capital among the ten Southeast Asian nations with Singapore, Malaysia, the Philippines, Thailand and Indonesia comprising the original Asean pie and Brunei, Cambodia, Laos, Vietnam and Myanmar being added as new members comprising the larger Asean. There will be a free flow of services and skilled labor, subject to the standard of competencies and qualifications agreed upon by the member states and the local laws of each country. Because the agreement has been slowly implemented since its signing in 2007, tariffs on most goods-except for sensitive products-have actually been eliminated. The free flow of certain skilled workers and professionals has likewise started in the areas of dentistry, engineering, nursing and other medical professions, architecture and several more.

There is reason to be upbeat, most of the speakers essentially said, but there is much to be done too lest we in the Philippines are left behind. We must remember after all that many problems beset the Philippine outlook. We have, for instance, the highest unemployment rate in the region and the number goes up yearly during graduation time. Will our unemployed be free to work in any of the Asean states? The answer is that the flow of persons is not that free, actually. A set of standards with respect to education and competencies has been drawn up and only those who will qualify can freely move in the region. Another problem we face is the growing number of poor people. While the percentage has remained the same, the increase in population has increased the number of people that are in fact living below the poverty line. If one gets to the bottom of how poverty will affect our competitiveness in the Asean integration, one will see that it affects the quality of our workforce. Poverty will result in lack or absence of sufficient education and training for competencies. Poverty likewise inhibits entrepreneurship.

An Asean that is unified as a single market and production base means there is a need to be competitive in order to survive and flourish. Singapore is ready while the rest in the Asean states are not. This should not make us complacent and act in a "business as usual" mode, said former Bugdet Secretary and economist, Benjamin Diokno. We need to make bold reforms, he said, if we are to compete with our Asean neighbors. Our government, he stressed, needs to invest in public infrastructures because we rank as among the worst in infrastructure development. In fact we have the worst sea ports and the worst airport. We must likewise revive and strengthen our manufacturing industry if we are to have goods to export and trade. The Philippines' manufacturing sector has died in the last two decades with cheaper goods flooding our market from China as well as basic commodities being rampantly smugglied. To strengthen manufacturing, the rules of employment must be re-studied and changed, too, and the cost of power must be reduced. Diokno said these are deterrents to investors. Our agricultural sector must be supported and modernized for greater productivity.

Hearing this, a number of the participants in the summit belonging to the poultry and agricultural sector complained that in other countries, the governments subsidize agriculture. In contrast, no such support is received by Filipino farmers. Thus, other countries' farm products are cheaper. These cheaper products are then smuggled into the Philippines, gravely hurting our agriculture industry, they said. Although agricultural products are among the sensitive commodities that will be excluded from the free flow of goods in the Asean, smuggling will have to be dealt with more effectively and seriously by the government.

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For the past decades, the Philippines has received the least amount of foreign direct investments in the region. Two key factors have stood out as serious deterrents to foreign investors. One is the restrictive provisions in our Constitution that limits or completely bans foreign participation in certain industries. The other barrier is our tax system. The data presented in the summit shows that the Philippines has the highest tax rates in the Asean. It imposes 30 per cent in corporate taxes while Singapore imposes only 17 per cent. The global average on corporate tax is only 24.08 per cent. With respect to personal taxes, the Philippines imposes a 32 per cent tax while Singapore, a mere 20 per cent. In terms of taxation of commercial profits, the Philippines charges an unreasonable high of 44.5 per cent while Singapore, a mere 27.1 per cent; Thailand, 29.8 per cent; Indonesia, 32 per cent; and Malaysia, 36.3 per cent. High taxes coupled with poor infrastructure can only mean an uphill climb in competing for investment to flow into the Philippines.

Our tax system must therefore be reformed to align it with the taxation in our Asean neighbors while our infrastructures are developed. Most importantly, Diokno said, the tax on income must be reduced because income is what one contributes to society. Taxation by way of VAT should instead be increased on consumption because it is what one takes from society. This system is not anti-poor, contrary to what others say because there is no VAT on food purchased from markets, he added. Moreover, the final tax on savings must be reduced as it effectively penalizes savings.

In the final analysis, whether the Philippine nation will lose out or win in the Asean integration will depend largely on the government. Will it take the bold steps needed or will it be on business-as-usual mode?

By Rita Linda V. Jimeno - manilastandardtoday.com

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