ASEAN ECONOMIC INTERGRATION IN 2015 AND UNEMPLOYMENT RATE IN THE PHILIPPINES Elah Czarina C. Andal, CPA IR 204

INTRODUCTION

A little over a year ago, the author attended a forum entitled “The Road to ASEAN Economic Community: Maximizing Opportunities and Facing Challenges.” The introduction in the forum’s invite included the following: “The 10 ASEAN member nations are moving towards integration, with the goal of forming an ASEAN Economic Community (AEC) by 2015. Designed to boost regional resilience, the AEC will create a single market and production base characterized by the free flow of goods, services, investments, capital and skilled labor.”1 With much optimism, the author takes note of a promise of greater opportunities for Filipinos as a result of the 2015 ASEAN economic integration and eventual formation of AEC. Further with excitement, the question as to whether this integration comes with the promise of lower unemployment rate in the Philippines beginning 2015 was posted.

BACKGROUND AND STATEMENT OF THE PROBLEM Several studies have been made and many articles have been written regarding the ASEAN economic integration as well as the AEC. This would include those which explain what will happen in 2015 when the integration takes place, those which challenge the readiness of the Philippines for the free trade economy or the preparation for it, or those which presents its impact to the country (both on the perspective of opportunities and challenges). This paper focuses on the specific benefit being laid out by the ASEAN economic integration in relation to increased job opportunities and its impact to the country’s unemployment rate.

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http://www.punongbayan-araullo.com/pnawebsite/pnahome.nsf/section_docs/BI427S_2-8-12 [accessed October 15, 2013]

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This paper aims to evaluate whether the 2015 ASEAN economic integration can contribute to the reduction of unemployment rate in the Philippines or not, and if so, whether the Filipino worker is skilled for the jobs brought about by the integration. Specifically, this study will try to answer the following questions: a. What is the ASEAN Economic Community and what is its purpose? b. What is the Philippines’ unemployment rate and how does it compare with the other ASEAN countries? c. Is the 2015 ASEAN economic integration the answer to the Philippines’ unemployment issue? Does the Filipino worker have what it takes to fit in the new jobs opened by the integration?

SCOPE AND LIMITATION The scope of the study covers ASEAN economic integration and its benefits, specifically those which relate to unlocking of greater job opportunities. It also covers review of unemployment rate in the Philippines and its standing in contrast with the other ASEAN countries. The author, however, wishes to disclose certain limitations as follows: • • • The study does not conclude on whether the Philippines is ready for the ASEAN economic integration. The study did not consider the mid-term review of the AEC Blueprint. The paper does not aim to resolve the issue on high unemployment rate nor define its cause, but limits its objective to the stated objectives above.

DEFINITION OF TERMS ASEAN Unemployment rate Association of Southeast Asian Nation defined as the number of people actively looking for a job divided by the labour force. Changes in unemployment depend mostly on inflows made up of non-employed people starting to look for jobs, of employed people who lose their jobs and look for new ones and of people who stop looking for employment.2 ASEAN Economic Community; is the result of the ASEAN economic integration in 2015. serves as a coherent master plan guiding the establishment of the ASEAN Economic Community 2015.3

AEC

AEC Blueprint

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http://www.tradingeconomics.com/philippines/unemployment-rate [Accessed October 15, 2013] http://www.asean.org/communities/asean-economic-community# [Accessed October 15, 2013]

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METHODS In analyzing the impact of the ASEAN economic integration to the countries unemployment rate, descriptive research4 method was performed. Data were gathered to answer the questions through observations and documentary analysis. For the most part, the author’s researches of publications relating to the topic were made through the internet.

RESULTS AND DISCUSSION AND REVIEW OF RELATED LITERATURE On AEC and its Purpose To quote from a publication of Local Government Academy (with stress on the underlined phrases), “The AEC shall be the goal of regional economic integration by 2015. AEC envisages the following key characteristics: (a) a single market and production base, (b) a highly competitive economic region, (c) a region of equitable economic development, and (d) a region fully integrated into the global economy. The AEC areas of cooperation include human resources development and capacity building; recognition of professional qualifications; closer consultation on macroeconomic and financial policies; trade financing measures; enhanced infrastructure and communications connectivity; development of electronic transactions through e-ASEAN; integrating industries across the region to promote regional sourcing; and enhancing private sector involvement for the building of the AEC. In short, the AEC will transform ASEAN into a region with free movement of goods, services, investment, skilled labour, and freer flow of capital. AEC also means that each member country basically has zero or near zero trade barriers among the ASEAN members (with few exceptions). This means that the trading of products between the ASEAN nations would be made easier and freeflowing from nation to nation. Tariffs and other trade burdens would be substantially removed or significantly lessened. Another effect of this AEC is the free flow of the work force. Essentially, it is back to basics where people can buy, sell, work and invest anywhere in the ASEAN if they wanted to (with limited restrictions).”5

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Descriptive Research. Data are gathered to test hypothesis or to answer research questions through surveys, interviews, observations and documentary analysis. [How to Write a Termpaper by Prof. Jorge V. Sibal, UP SOLAIR] 5 Local Government Academy, Department of Interior and Local Government. Rising As One: The Filipino Nation Towards the ASEAN Economic Integration. 2015 ASEAN Economic Integration FAQ. Copyright 2013.

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The concept of free movement or free trade dates back to the time of Adam Smith and other personalities in the world of labor and economics. According to the classical economic theory, free trade is the primary engine of economic growth because of the comparative advantage theory. In the history of economics, Adam Smith is a believer of the economics of free trade and free markets. Further, Jean Baptiste Say said, “As long as market forces operate freely, there cannot be a condition of oversupply or overproduction in an economy.” The classical free trade model was later refined by Swedish economists Hecksher and Bectil Ohlin (neo-classical factor endowment trade theory) which explains globalization and the international specialization in production and division of labor.6 Having said all of these, the author determines that a bigger job market is on its way to the Philippines beginning 2015 (or earlier). For one, professionals with certifications which are only recognized in the Philippines will now be recognized in other ASEAN countries thereby giving the professionals the chance to compete in other ASEAN countries.

Unemployment Rates The Philippines unemployment rates for the last five years ranged from 6.3% (during last quarter of 2007) to 8.0% (second quarter of 2008 and 2010). Graph 17

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Jorge V. Sibal. Philippine Labor and the Economy, Course Guidebook and Selected Readings. Copyright 2008. 7 http://www.tradingeconomics.com/philippines/unemployment-rate [Accessed October 15, 2013]

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In comparison with the other ASEAN countries, the Philippines has the highest unemployment rate. According to IMF, one cause of unemployment in the Philippines includes suppressed economy. Other causes include a large working population in a relatively small area with little industry. 8 Graph 2. Table 1.9
Country Philippines Indonesia Malaysia Brunei Laos Vietnam Singapore Thailand Cambodia Unemployment Rate 7.10% 6.14% 3.30% 2.60% 2.50% 2.06% 1.80% 0.83% 0.20% Data as of Dec-12 Aug-12 Jan-13 Dec-11 Dec-09 Sep-12 Dec-12 Jan-13 Dec-11

The Philippines’ unemployment rate of 7.10% as of December 2012 is equivalent to 3.00 million people for which the following statistics9 were provided: • • • 61.30% or 1.84 million are male 48.90% or 1.47 million belong to the age group of 15 to 24 years old 21.70% or 0.65 million are college graduates, 13.60% or 0.41 million are college undergraduates and 32.80% or 0.99 million are high school graduates

ASEAN Economic Integration: A Way to Lessen the Unemployment Rate in the Philippines? With the formation of AEC through the economic integration of the ASEAN countries in 2015, the opportunities being opened to the Filipino workers is expected to increase and the horizon where jobs can be found is expected to widen. Instantly, there is hope in the mitigation of the unemployment issues in the country. However, both availability and competence of the Filipino, are necessary elements in making sure that the said opportunities are grabbed and eventual employment of the unemployed takes place.

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http://www.ask.com/question/causes-of-unemployment-in-the-philippines [Accessed October 15, 2013] http://www.pinoymoneytalk.com/unemployment-rates-by-country-2013/ [Accessed October 15, 2013]

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The unemployed Filipino, being readily available already meets one of the two necessary elements previously mentioned. In matters relating to competencies, a conclusion was drawn from the information obtained from Grant Thornton’s International Business Report. The report said that lack of skilled workers is the key constraint on growth for businesses in the ASEAN region, as cited by 43% of businesses. The lack of talent is particular problem for businesses in Singapore (53%) and Malaysia and Vietnam (both 46%).10

The Philippines presented the lowest percentage at 24%, henceforth, exhibiting a better position compared with other ASEAN countries in terms of skilled workers. Accordingly, both elements (availability and competence) are demonstrated by the Filipino worker. Based on descriptive research, the author concludes that the ASEAN economic integration will give way to a lower unemployment rate in the Philippines, not only because more opportunities will be opened but also because the previously unemployed Filipino worker is skilled and fit for the job.

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http://www.internationalbusinessreport.com/files/ibr2012%20-%20q2%20asean%20focus.pdf [Accessed on October 15, 2013]

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REFERENCES

Local Government Academy, Department of Interior and Local Government. Rising As One: The Filipino Nation Towards the ASEAN Economic Integration. 2015 ASEAN Economic Integration FAQ. Copyright 2013. Sibal, Jorge V. Philippine Labor and the Economy, Course Guidebook and Selected Readings. Copyright 2008. Sibal, Jorge. How to Write a Termpaper. www.punongbayan-araullo.com* http://www.tradingeconomics.com* http://www.asean.org* http://www.ask.com* http://www.pinoymoneytalk.com* http://www.internationalbusinessreport.com*

*Specific pages used in these websites were referenced through footnotes throughout the paper.

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