“Impact of ASEAN 2015 to
Inclusive Growth and
Development in the
Philippines”
ALVIN P. ANG, Ph.D.
Senior Fellow, Eagle Watch and Professor
Department of Economics, School of Social Sciences
Ateneo de Manila University

• Defining inclusivity
• Contextualizing Inclusivity in ASEAN
• ASEAN integration as a route to inclusivity
• Philippine context
• Conclusions

• Equity, Equality of Opportunity, Protection in
Markets and Employment Transitions
(Commission on Growth and Development,
2008)
• Raising the pace of growth and enlarging the size of the economy by providing a level playing field and increasing productive employment opportunities (Ianchovichina and Gable, 2011)

• Difficult to quantify as indicators as separately analyzed as an issue of inequality and an issue of growth
• Thus, inclusivity means that economic growth and reducing inequality are happening at the same time

ASEAN 2015 is
Not an emerging
Problem but a
Validation of the
Region’s integration!
It is a world of
Integrating intermediate
Goods!
Production of a
Hard drive

The ASEAN integration process is intended to address:
• Core issues : Small market, transactions costs, policy consistency and stability
• Domestic issues : especially related to priority integration sectors

ASEAN initiatives on Inclusive
Growth
• The ASEAN Framework for Equitable
Economic Development (3 rd sub Pillar)
– Recognized the need to narrow development gaps within and between
Member States, better access to opportunities for human development, social welfare and justice and more inclusive participation in the process of ASEAN integration and community building

• Target policies to promote sustainable growth and providing equal opportunities irrespective of income, gender and size of enterprise
• Connectivity among member states through physical infrastructure, human capital mobility, technology transfer and access to markets

• Most achievements in AEC are in the 3 sub pillars.
• Equitable Economic Development pillar focuses only on SME Development and
Initiative for ASEAN Integration (IAI)
• Inclusive growth will require more deliberate individual country efforts that integrate and connect with other member countries.

• Integration seems to be the best option to achieve Economies of Scale for the region
– however access to opportunities and gain are not certain.
• Integration may require regional identity – which is not present in the region that has no common religion, language and a single land mass (Daniel Wu)

• Not to insist on a regional redistribution policy , but for each member country to focus on ensuring domestic capacities to harness competitive advantages
• ASEAN can review the development gap and tap public private expertise to execute assistance policies related to institution building, human capital development, infrastructure and finance.

• Right policies – necessary conditions
• Institutional framework to implement right policies – sufficient conditions.
• Institutions include culture, political structure allowing for economic policies and institutional policies to work together.
• Effective use of investments is another – requiring the shift of dependence from international sources to domestic sources

• Domestic openness to trade and investments
– Domestic reforms leading to inflow of FDI including other technologies and skills>increase competitiveness of domestic production>trade promoting production> giving rise to further increase in FDI>high economic growth
• Regional openness from one group of economies to another
– Countries following openness lead to regional division of industrial labor and stopping competition among countries with same production- complementary vs competition>intraregional investment and trade

• Minimizing gap require higher economic growth and direct policies that close nonincome gaps.
• Philippine growing robustly above the 5% generational growth since 2010 but continue to have poverty rates of close to
25%.
• Threats due to uncertain global environment and natural disasters

• Philippines continue to receive good marks

30%
25%
20%
15%
10%
5%
0%
-5%
Growth can be internally financed
Direct investment as % of GDP
Gross domestic capital formation as
% of GDP
Gross national saving as % of GDP
OFW Remittances as
% of GDP
Portfolio investment as % of
GDP

140 000
120 000
100 000
80 000
60 000
40 000
20 000
0
-20 000
-40 000
Other Services
Public Administration
R. Estate, Renting &
Business Activities
Financial Intermediation
Trade and Repair
Transport, Storage &
Communication
Electricity, Gas and Water
Supply
Construction
Manufacturing
Mining & Quarrying
Fishing
Agriculture and forestry

Exports Share
Electronics 58%
Clothing
Furniture
4%
3%
Wiring 2%
Copper 2%
Bananas 1%
Tuna 1%
Imports Share
Electronics 35%
Fuel
Transport
22%
5%
Food 5%
Machinery 4%
Chemicals 2%
Iron 3%

60%
50%
40%
30%
20%
10%
0%
100%
90%
80%
70%
Services
Manufacturing
Agriculture

60,00
50,00
40,00
30,00
20,00
10,00
0,00
Poverty Incidence Remains a
Challenge
2012
1991
2006
2009

50,0
40,0
30,0
20,0
10,0
-
Poverty Highest in Low Economic
Activity Areas
60,0
Share to GDP
Poverty Incidence

Connecting Domestic Inclusivity to ASEAN integration
• Consider the priority sectors that match our inclusivity issues! i.e. Agriculture and Tourism
• firms that gain from market expansion & improved competitiveness will definitely gain
• POTENTIAL BENEFIT - increased FDI, wider market access for Philippine firms and their products, lower input costs, lower transactions costs, better quality goods & services at lower prices for consumers

1. Sustain current revenue streams in IT-BPO, semicon-electronics
2. Pursue SME countryside growth (coffee, cocoa, processed food, coco coir, etc.)
3. Develop new revenue streams (clinical services, animation, software and game development)
4. Recapture sectors (apparel, footwear, travel goods, auto-parts, electronic manufacturing)
5. Revisit backbone sectors (copper downstream, chemicals, iron and steel)

• Our SME sector is facing the following challenges (DTI):
• Lack of access to finance, technology, skilled labor, inability to comply with standards
• Weak linkages to high tech sectors
• Penetrating export market a major challenge

• Growth Strategies to have SPATIAL and
SECTORAL dimensions to ensure inclusivity (NEDA, 2014)
• Geographical convergence of living standards must have an integrated, locally anchored service delivery…(PHDR 2013)

• Response must be area specific…eg provinces with high proportion of poor requires social assistance programs, while those prone to hazards must have social insurance and income diversification
• Create sectoral outcomes eg agriculture – improved food security, finance – expanded access, environment – sustainable and climate-resilient economy

• Capacity building is crucial
• Compliance with standards – need for education, information, technical support
• Setting up accredited testing laboratories
• Catering to SMEs
• Align domestic laws and regulations with
ASEAN commitments.
• Need for greater information and education campaign

• Work outside and Build inside!
• Ensure external commitments can be met
• DTI-led road map must be area specific
• Commitments to be clear to the national and local bureaucracy
• Inclusivity requires the participation and responsibilities of LGUs
• Reconsider our agricultural policies and strategies

• Zero import duties – potatoes, vegetables, spices, ingredients, sauces, coffee (for rice, 40 to 35% and sugar, 10 to 5% in
2015)
• We may have protected the agricultural sector too much at the expense of sending people abroad.

Isaiah 54:2-3 (NIV)
Enlarge the place of your tent, stretch your tent curtains wide, do not hold back; lengthen your cords, strengthen your stakes. For you will spread out to the right and to the left…

Thank You and God bless!
www.angalvin.com
Twitter: @angalvin