MANILA, Philippines – In a garments factory in Yangon, Myanmar’s most populated city, 40-year-old Aye Aye Khaing makes sure that every pair of denim jeans that lands on her table is perfectly sewn, with every thread in place.
Khaing, in charge of quality control, has been toiling at the factory for more than two decades now. She smiles as she carefully inspects each piece of clothing but the dimpled smiles are unable to conceal the jitters over the planned economic integration of the Association of Southeast Asian Nations.
She said she does not know the details of the planned integration but feels insecure just the same, unsure whether or not the economic integration would improve the lives of garment workers like her.
“We hope it will be okay,” she said in an interview in August in the factory, in between folding and checking every finished piece of clothing that lands on her table.
Myanmar’s garments industry has suffered before and is still on the road to recovery. From a peak of 400,000 workers, the figure went down to 60,000 in 2005 when the US and the European Union slapped trade sanctions on the Southeast Asian countries. The sanctions have been lifted just recently.
The AEC or Asean Economic Community is envisioned to be a single market and production base for the 10-member Asean community, with an estimated consumer base of 600 million people. Integration means duty free importation and tougher competition among member countries.
But the planned economic community is sending jitters not only to workers like Khaing but also to industry leaders such as Federation of Chambers of Commerce and Industry of Myanmar vice president Maung Maung Lay.
Myanmar businesses, he said, are not ready, compared to their peers in the region.
“We are lightweights compared to the heavy weights in the region. This is making us a bit jittery,” Lay said in an interview in his office in Yangon in early August.
Philippine players, too have their share of jitters. Philippine Exporters Confederation Inc. president Sergio Ortiz-Luis Jr. said the garments industry is up for another challenge and has yet to fully recover from past trade liberalization initiatives.
The sector is expected to post $1 billion in exports this year, up from $800 million in 2012 but still below its exports peak of $1.6 billion.
Philippine company executives said the move toward an integrated community would bring in a lot of challenges.
“There will be realities in the streets for industries who will suffer. I am not sure that Asean countries are really politically ready to suffer the consequences. Asean 2015 is hardly discussed intensely,” said Ysmael Baysa, chief finance officer of Jollibee Foods Corp., a Filipino-owned multinational fast-food chain.
He said that in the Philippines, the agriculture sector would likely get hit. He thinks it is better to delay the implementation rather than to suffer the consequences.
“Agriculture will probably get hit. We lack fertilizer, palay, etc. What happens when farmers in the provinces become uncompetitive? That’s a big question. These things have to be confronted. There are some moves to delay the implementation for some of the sectors because of the lack of readiness. It’s better to delay implementing something which we are not ready for and which we do not know the consequences,” Baysa said in a business forum in Manila.
Eric Francia, managing director of Philippine conglomerate Ayala Corp. said the integration provides both opportunities and threats for Philippine businesses.
He said what is needed is to carefully plan for the AEC. “This integration provides both opportunities and threats. There are also opportunities especially in the manufacturing sector. It is important for the Philippines to crack the map on this one,” Francia said.
Rafaelita Aldaba, a research fellow for government think-tank Philippine Institute for Development Studies (PIDs), said the country’s micro, small and medium enterprises will be hit by integration if government would not help the sector prepare for integration.
In the forum Gearing UP SMEs for Asean Economic Community 2015 held in Manila in August, Aldaba said the AEC presents opportunities for the sector but at the same time also poses challenges.
SMEs can serve as potential suppliers of outsourced parts and services and provide link to exports in auto, machineries, electronics and garments.
Aldaba, however, noted some major challenges for SMEs such as how to penetrate the export market. “Penetrating the export market is a major challenge for SMEs.”
She said that government support and close coordination between government agencies and the SME sector are necessary to make micro, small and medium enterprises globally competitive.
Ways to improve competitiveness include rebuilding capacity of existing industries, strengthening emerging industries and maintaining competitiveness of comparative advantage industries, she said.
Opportunities and threats
Asean Secretary-General Le Luong Minh, in a speech at the 11th Management Association of the Philippines International CEO Conference held recently in Manila, sought to allay fears of regional integration.
“Despite risks caused by global financial crisis and other challenges including weak external demand, rising food and energy prices and growing global economic imbalances, the 2013 outlook for Asean remains broadly positive. These positive figures show that Asean is becoming more integrated and remains an attractive destination for global, regional and local investments. While the current global uncertainty will cause the regional growth to be modest, economic activity in the region will remain robust,” he said.
The private sector, he said, should prepare for the integration by increasing investments.
With Asean’s immense growth potentials, a company preparing for 2015 should consider increasing its investments, he said. “(The private sector) should no longer limit its sights on the investment opportunities in its own home country but also explore the possibilities in the other member states. The private sector should carry out in-depth market analysis of the region to identify potential markets and challenges, given the diversity in language, culture and development gaps between Asean member states,” Minh said.
He said that through private sector partnerships, the region would see more cross-border investments.
“Asean has mechanisms in place that facilitate these arrangements,” he assured.
Minh said that without full implementation of the regional commitments at the national level, regional economic integration could not progress.
He said that there would be efforts on the part of the Asean to enhance communication of integration efforts.
“Based on recent Surveys on Asean Community Building 2012, of the total respondents in the 10 Asean capital cities, 76 percent reported that they have almost no idea of what the Asean Community is; 55 percent of the business respondents indicated having a slightly better understanding and 30 percent showed a lack of basic understanding,” he said.
Minh said that based on survey results, Asean integration is seen as having positive impact in that it will create more jobs and allow one to travel more freely within the region.
At the same time, the business sector expressed two major concerns. “One is that they may have to face greater competition. Two, they may have to deal with the impacts of increased labor migration. Due to wide development gaps and varying levels of competitiveness, there is also a perception that the member states with more developed economies would benefit more from economic integration,” he said.
The development gaps and the lack of capacities as well as lack of awareness and understanding will bound to have an impact on meeting the 2015 goals.
“Thus, there is a need for more concerted actions and better coordination at the national and regional levels as well as further enhancement of the support and compliance mechanisms in Asean. There is also a need to intensify our communication efforts to the public and to our business community – who should be kept well-informed and consulted on AEC initiatives,” he said.
Toward this end, he said the Asean secretariat would also continue to do its outreach to the private sector, both with multinational companies (MNCs) and small and medium enterprises (SMEs) to enhance cooperation with the business community.
He also said it is necessary to study the Asean economic agreements and programs to allow one to see the opportunities offered by economic integration – from trade facilitation, labor mobility, to infrastructure connectivity, among many others.
“It will also allow one to understand the changes brought about by AEC and their accompanying impacts. In turn, this will enable companies to formulate strategies and prepare for 2015,” Minh said.
At this juncture, the secretary-general said Asean companies should start strategizing on how they can capitalize on the single market and production base which will be created by 2015.
“They should also capitalize on the market access provided through the various existing bilateral Free Trade Agreements (FTAs),” he said.
Whether or not the AEC would indeed benefit the region and its 600 million people remains to be seen.
Workers like Myanmar’s Khaing can only hope that such a development would lead to better lives and not bring anyone deeper into poverty. –Iris C. Gonzales (The Philippine Star)
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