PH services sector seen to gain from ASEAN integration

Posted at 03/21/14 4:11 PM

MANILA, Philippines – The Philippine services sector is expected to benefit from the Association of Southeast Asian Nations (ASEAN) integration in 2015, according to Jayant Menon, the lead economist for trade and regional integration at the Asian Development Bank (ADB).

Menon cited strong communication skills and education system as the key drivers in the success of the country’s service sector compared to its ASEAN neighbors.

The services sector includes the tourism and business process outsourcing industries.

“The Philippines has been very successful compared to the other ASEAN countries in terms of services and this is because of its strong English language skills and strong education system,” he said at the sidelines of the book launch of “The Asean Economic Community: A Work In Progress,” which he co-authored with former ASEAN secretary general Rodolfo Severino, Sanchita Basu Das, and Omkar Shrestha.

Rod Severino, Omkar Shrestha, and Jay Menon at the book launch

Menon, however, warned that the Philippine education system may be focusing too much in developing overseas workers.

"There’s a lot of benefits that come from overseas workers through remittances and the like, but in a long term development plan, is the educational and training systems being too skewed towards exporting your greatest resource,” he said.

“What you need to do long term is to create conditions to train your workers to stay at home and contribute to growth at home,” he added.

The Asean Economic Community (AEC) will open doors for greater labor mobility of skilled labor in eight professions: architects, accountants, dentists, doctors, engineers, nurses, surveyors and tourism workers.

But Menon said the Philippines has already been benefiting from “very high levels of mobility,” noting that the AEC will facilitate further export of skills from Philippines to ASEAN member-countries.

Philippine Overseas Employment Administration (POEA) data showed that 1.8 million workers were deployed in 2013, with approved job orders reaching 793,415, 40.9 percent of which are mainly in the services, production, and technical worker sectors.

Menon also said that while a majority of labor mobility in the ASEAN falls under the low-skilled segment, the AEC has left it in its agenda due to its “sensitivity.”

The trade of low-skilled workers, Menon added, is risky for both the sending and receiving countries.

“For sending countries, these workers are vulnerable to all forms of abuse. We see cases of domestic helpers subject to all kinds of abuse in other countries, and these are the legal workers. Imagine the conditions of unrecorded workers, they are likely to be a lot worse—not just in terms of bad wages, but also in their safety and health,” he said.

For receiving countries, on the other hand, unrecorded workers may pose as a security risk.

“Both countries can benefit from formalizing these labor flows in the low-end skilled workers but we need to look beyond the AEC for that because it is not included in the agenda. They would have to involve bilateral agreements initially,” said Menon.

Jayant Menon, ADB lead economist

The agricultural sector, meanwhile, may also see opportunities once the AEC is implemented.

“The Philippines is looking to increase agricultural exports to support its future growth and this is an area where the AEC may create opportunities rather than risks,” said Menon, adding that the manufacturing sector “is not anticipated as much in the regional production networks as the other ASEAN countries.”

“There’s potential there to improve if the AEC is implemented in a legitimate way,” he said.

While there are some potential “winners” and “losers” in the short-term, Menon believes the positives will outweigh the negatives as long as governments implement mechanisms to keep up with the integration.

“The challenge for governments is to ensure that workers in shrinking industries are retrained and re-equipped quickly in the expanding industries within the economy. We expect that the expansion overall will be much larger than the shrinkage, this is where the ‘win-win’ comes in,” he said.

He is also optimistic that the Aquino administration is doing its job in focusing to boost investments, infrastructure, and health and education.

“Based on that there is still a lot of work to be done but with the current government putting a huge emphasis in improving infrastructure, things are looking good for the Philippines,” he said.

The AEC will unlikely meet its targets by December 31, 2015, but Menon said 2015 should not be seen as an end in itself but as a “milestone.”

“It shouldn’t be a hard target. AEC shouldn’t be judged whether or not we reach our targets by that date. If it increases momentum, then that’s a good thing, but a lot of the work in implementation is supposed to take place post-2015, and this is where the post-2015 agenda becomes more important,” he said.