ALVIN P. ANG, Ph.D. Senior Fellow, Eagle Watch and Professor

1. “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 Ateneode Manila University

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

3. What is Inclusivity? • 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)

4. Inclusive Growth • 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

5. ASEAN Community 3 Pillars

6. The AEC from a broader lens

7. The need for integration!

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

9. ASEAN 2015 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

10. ASEAN initiatives on Inclusive Growth • The ASEAN Framework for Equitable Economic Development (3rd 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

11. …ASEAN initiative… • 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

12. ASEAN Challenge • 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.

13. ASEAN Challenge • 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)

14. Key to ASEAN Inclusive Growth • 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.

15. 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 Building Up – Trade capacities

16. 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 2 levels

17. Philippine Example • Minimizing gap require higher economic growth and direct policies that close non-income 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

18. Investment Grade • Philippines continue to receive good marks

19. Growth can be internally financed

20. GDP Contribution per industry

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

22. Employment Structure

23. Poverty Incidence Remains a Challenge

24. Poverty Highest in Low Economic Activity Areas

25. Connecting Domestic Inclusivityto 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

26. Philippine Products in Jakarta Supermarket!

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

28. Challenges • 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

29. Philippine Overall Strategy • 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)

30. Inclusive Response • 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

31. PIDS Recommendations • 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

32. Conclusion • 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

33. ASEAN tariff • 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.

34. Challenge localities to be Competitivelocalities

35. The FINAL WORD….GET READY TO COMPETE! 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…

36. Thank You and God bless!www.angalvin.comTwitter: @angalvin