Thursday, April 24, 2014

Is Pangasinan ready for the ASEAN free market?


Uniting for Economic Integration. ASEAN leaders gathered at the 22nd ASEAN Summit in April 2013 in Brunei Darussalam have shown their commitment to achieve the ASEAN Economic Community established in 2003 by enforcing its immediate implementation in 2015. The AEC allows freer flow of business 

In a 2003 summit of ASEAN leaders, a vision to finally achieve an integrated economic market by 2020 resulted in an agreement of establishing the ASEAN Economic Community (AEC), a unified market and production base operating under a trade order characterized by a freer flow of goods, ser-vices, investments, capital, and skilled labor.

Four years after its institution, leaders of the ASEAN resolved to accelerate the AEC by 2015.

Simply, the AEC means more doors for opportunities have opened, and even windows are made conveniently available for a great chance to engage in a market of more than 600 million people all over the region, together with our ASEAN neighbors Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, and Vietnam.

Yet, the seemingly vast possibilities the AEC will bring to businesses are just as overwhelming as the struggles, especially to our small business owners in the Philippines.

What does it mean to Philippine MSMEs?
For Micro, Small and Medium Enterprises (MSMEs) in the country, it means a tighter grip on the reins. With more than 700,000 businesses in the country, Micro, Small and Medium Enterprises (MSMEs) represents an astounding 99.6 percent of the statistics, providing 62 percent of employment to Filipinos, according to NSO-MSMED Council. Obviously, MSMEs populates the majority of Philippine industry that when left neglected, enfeebles the bulk of our nation’s work-force and people’s livelihood.

Although foreign products, especially Asian goods, can already be found in our common groceries, a considerable volume of these Oriental products is expected to penetrate even our small-scale markets with the onset of the ASEAN Economic Community

For giant conglomerates in the country, this imminent free trade system is an opportunity to easily expand their business operations all over the Southeast Asian region.

For MSMEs, this imposes an undeniable, foreboding indication of a tougher, across-the-board competition. Recently, several distinguished corporate entities like Moody’s Investors Service promoted the Philippines into a higher investment standing, placing the country among the highest in the Asia-Pacific.

However, these recognitions do not save minor entrepreneurs in the country from the looming deadline of the AEC in 2015, nor ensure an upbeat chance for MSMEs to endure the intra-regional contest.

Can Philippine MSMEs compete?
“They (Philippine MSMEs) can’t. All of our neighbors have solved these problems. Their SMEs are now the back-bone of their industries. Here, SMEs are struggling. The attrition rates in the Philippine SMEs especially among the exporters are tremendous.

Now if you’re looking at SMEs, franchise businesses are doing fine – they have an 85-percent survival rate and they can compete. But other than that, especially in places outside Metro Manila, no way (for SMEs to compete,” Philippine Chamber of Commerce and Industry (PCCI) honorary chairman and treasurer Sergio Ortiz-Luis Jr., admit-ted.
He further pointed out that “Philippine SMEs are hobbled by constraints like lack of access to financing, antiquated labor laws, challenging business environment, and for those that export, even the strong peso.”

How about Pangasinan MSMEs?
Probably. Notwithstanding the province’s current economic status and in-vestment plans which are highly reflected in development projects and people-centered programs, the fighting chance of our local MSMEs in Pangasinan is just as slim and limited like any other in the country.

Beforehand, Ortiz-Luis has already depicted Philippine MSMEs as incompetent when it comes to struggling un-der an intra-regional business setting set by the AEC. All the more so for MSMEs in the provincial markets. This, however does not mean demise of Philippine MSMEs. Actually, there are clear hopes to cope with the co-ing of AEC, ‘simple adjustments’ as PCCI Vice President for Promotions Leonore Diokno Abella exclaimed. These ‘simple adjustments that she mentioned “can make all the difference” to MSMEs.

Standing a good, fighting chance
In an interview printed in the March 2013 edition of business magazine Entrepreneur, PCCI VP for Promo-tions Leonore Diokno Abella pro-posed some five “doable” steps that MSMEs can follow to prevail the impending AEC competition.

►Improve and simplify. “SMEs preparedness can come by improving the system. Perhaps there are many steps to make a product, but there are ways to simplify, lessen costs of operations. That’s the only way. They could also think of alternative raw materials. And they have to be cost-conscious,” Abella explains to Entrepreneur.

►Give what the market wants. “They should anticipate (what the market wants). For example, they should think of what’s happening in the world. Homes are getting smaller.
People are getting health conscious. They should know about these things. They should tailor their products to what the market wants.”

►Track trends. Abella mentions the shampoo packaging revolution that is popular even in rich countries. They’ve learned to downsize, she says. “Exporters have to understand that it’s not business as usual that people buy in bulk. Before, the Americans, the Europeans they ordered a lot. Not anymore. The orders are becoming smaller.”

►Control costs. She adds that enterprises should improve employee productivity through trainings. “It’s all about continuing cost control,” Abella says by citing the big chance of being hired of workers who are mindful of the businesses’ resources applying in a home décor company.

►Get help. SMEs should also take advantage of government programs that help businesses improve their operations, she says. Businesses can also get assistance from the government in improving their workflow, the layout of their factory, even the use of raw material or even packaging, Abella went on.

The problem with such types of pro-grams is that the government may not be doing enough to promote them, she concedes. “Hindi siguro sexy magpromote ang government ng programs nila. They have to make it sexy.” Government should also do more in promoting exports, she says.

For possible funding sources that can help business in the country, Abella pointed out two government financial institutions – Philippine Export-Import Credit Agency and Small Business Corporation – which lend fiscal resource to associations, which then lend to their members.

The 2015 deadline
As detailed in the AEC Fact Book, the goal of establishing an ASEAN Community is set by the year 2020, and the realization of this is through the foundation of its fundamental three (3) pillars: the ASEAN Political-Security Community, ASEAN Economic Community and ASEAN Socio-Cultural Community.

In order to “transform ASEAN into a region with free movement of goods, services, investment skilled labour, and freer flow of capital,” the AEC is set to be accomplished in 2015.

But according to business leaders at the 6th ASEAN & Asia Forum, AEC is still a long way off and that a real ASEAN economic integration must ensure a seamless, cross-border trade and investment. (Channel News Asia)

In the global economic community, US Chamber of Commerce and AmCham Singapore launched the ASEAN Business Outlook Survey on August 2013, with US companies preparing strategies patterned on ASEAN’s plans to diminish trade barriers for goods, services, and investment among the member countries towards economic integration. The highlights of which were discussed at the ASEAN Business and Investment Summit in Brunei Darussalam in the same month.

The presentation of the survey high-lights in the Brunei Summit involved the polling of 475 senior executives representing US companies in all ten (10) ASEAN countries on whether the AEC will really meet its deadline in 2015.

In the survey results, 52% thinks that this goal (ASEAN Economic integration) will not be in place by 2015 while 23% percent of the respondents are certain it will be realized by the scheduled dead-line, and the remaining stood neutral.

Gleaning from these survey results, it appears that the 2015 goal of the AEC will only serve as preparation for the coming years of adaptation to the set-ting of the much-awaited economic integration.

Nonetheless, the ASEAN Economic Community is inevitable, hence MSMEs and the entire Philippine industry have only one thing to do: PREPARE.  
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