ASEAN INTEGRATION AND THE SUCCEEDING PRESIDENCY

Prof. Erle Frayne D. Argonza
Consultant-Development Center for Asia Africa Pacific

[13 December 2009]

BACKGROUND
Foreign policy should not be left unaddressed by any aspiring presidential candidate. The absence of foreign policy in the platform of a candidate could prove disastrous, as it indicates the parochial mind of an aspirant who is over-focused on domestic policy and governance.

Chief issue that could very well occupy the debates would be the ASEAN integration (circa 2015). The concordance of treaties on climate change and economic policies (whether to stress on fiscal stimulus or strengthening regulations) are now ongoing, at a time when Europe had consolidated through the implementation of the Lisbon Treaty. The EU-type regional integration will be a stronger agenda for emerging markets in the short-run and will lead to modifications of each one’s foreign policy architecture.

PAST FOREIGN POLICY FOCUS
Prior to 1986 (ascendancy of the revived democracy), there was largely a dis-focus in the foreign policy field. This was an area of policy drift, so to speak, as the country had no independent foreign policy to speak of. Our foreign policy agenda then were dictated by the USA (concerning alliances and enemies) and the World Bank-IMF group (concerning development and economics).

Breaking out of the foreign policy chain was the greatest challenge from 1986 onwards. The Aquino regime promised to pay all of our debt obligations, thus ensuring our encumbrances with the global financial cartels. On the other hand, the Senate abrogated the US-RP Military Bases Agreement in 1991, a noble act that served as impetus for configuring a new foreign policy architecture.

The Ramos and Erap regimes continued the same subservience to the IMF-World Bank group (representing global financiers) and U.S.-centered alliances, even as the Senate signed the Visiting Forces Agreement or VFA within that two-regime period (1992-2001). The VFA was a setback to efforts by foreign policy quarters (diplomatic corps) to help us all procure a condition of independence in foreign policy, even as US troops continue to make presence in key areas of the archipelago.

The Afghan and Iraq wars was a watershed to our international alliances and efforts at achieving independence in this regard. Though committed to sending troops at the inception of the wars, the GMA regime later withdrew troops in both countries. Not only that, the same regime also re-carved the focus of foreign policy from one of gaining alliances and cooperation with other states, to one of advancing the welfare of overseas Filipinos. Our graduation from the IMF programs was also witnessed during this regime, which brought us nearer to independence in terms of international economics and development.

CHALLENGES TO THE NEXT PRESIDENCY
The efforts aimed at achieving independent foreign policy, as re-assertion of our national sovereignty, should be ensued by the succeeding presidency. The shift from external relations to overseeing the welfare of overseas Filipinos is a clear victory of the sector concerned (overseas Pinoys) and should be respected. A renewed assessment of our standing via the IMF (which imposed the disastrous austerity programs in the past) should be done, to ensure that we have indeed exited from its programs and impositions (via its ‘letters of intent’). The clamor to abrogate the VFA should be ensued while the momentum is there.

It is argued that the area where the next presidency can make a dent—foreign policy-wise—is the concurrence of a new treaty leading to the economic integration of the ASEAN at the least, and commitments to an eventual political integration at the maximum. The Philippines must re-assert its leadership in the region, a leadership that eroded due to the perceived rampant graft of government. Hopefully, a new presidency will revive our standing in the international community, and bring back our image as the leading nation in the region.

Among other things, the presidency should ensure the installation of regional institutions, to note: (a) regional executive body (with rotating chairmanship), and (b) regional central bank. The tacit concurrence of Asian countries to launch an Asian currency and an Asian Monetary Fund should also be concretized, with the ASEAN serving as the hub for finalizing the setting up of such institutions. The political parties in the region should also be encouraged to form coalitions and alliances, in preparation for a future ASEAN parliament. There also is the travel & tour agreement of non-visa passports for cross-border travels by citizens and legitimate stakeholders of the region.

Towards the tail end of the presidency, the launching of an ASEAN-wide taxation system, such as the VAT and Tobin Tax (for cross-border financial transactions), should be undertaken. Needless to say, the presidency should lead in galvanizing trade agreements and implementing them region-wide, along a win/win situation for the diverse stakeholders.

The presidency should not forget the forging of a regional identity, which should be buttressed by a massive campaign to develop regional loyalty by the citizens of the region. Along the way, people-to-people interactions, exchanges and cooperation should be encouraged.

DOMAIN OF WEALTH OF NATIONS: BOTH DOMESTIC & OVERSEAS

Erle Frayne Argonza

 

[Writ 23 March 2008, Quezon City, MetroManila]

 

 

The antiquated debate regarding which domain should be the main source of national wealth—whether domestic or overseas—is still alive today. In the article of New Nationalism, I argued that in the emerging context of post-industrialism, this debate has become futile and unproductive. Instead of stressing a domestic versus international mindset, I argued for a both/and frame.

 

Admittedly, the overseas domain as a source of wealth is as palatable as it used to be during the era yet of the city-states of Northern Italy (Venice, Florence). This has become the backbone of mercantilism, which in turn became the backbone of nationalist economics. Old Nationalism henceforth carried the pro-mercantilist banner of seeking wealth primarily from international operations. But this time around, this position has to be revised in the light of import-substitution success.

 

In the Philippine case, we have been having it both ways. On the one hand, our manufacturing sector’s products are largely consumed 86% of the time for the domestic market, indicating the optimization of the import-substitution aspect of our development efforts. On the other hand, our overseas employment and investments have been churning out a whopping Net Factor Income from Abroad or NFIA worth 11% of the GDP.

 

New Nationalism, to my mind, should rather have it both ways, as culled from this and other parallel experiences in emerging markets. At this time particularly, Foreign Direct Investments or FDIs by Philippine-owned or controlled companies has begun to take off and contribute to our national coffers. Add to this our exports worth 40% of GDP, and remittances from labor export of worth 10% of GDP, and one can see the broad picture of the potency of the overseas domain as source of national income.

 

Below is the entire subsection on the domains of wealth production culled from the New Nationalism article.

 

Generate wealth from both external and domestic markets.

 

Various stakeholders in the past were divided along the question of what should be the driver of growth & development (demand-side discourse): the external, or internal market? The followers of the ‘externalists’ were the ones behind the export-oriented development strategy, whose rationalizations for massive exports were quite poor recycles of the mercantilist contention that wealth should be produced more from out of the external markets (colonies during the time of empires). The ‘internalists’ were the ones behind import-substitution strategies, whose rationalizations were poor photocopies of Keynesian demand-side formulations.

 

In today’s context, it is wiser to view both the external and domestic markets as synergistic spheres for accumulating national wealth and meeting head-on the demands for delivering welfare. The external market discourse can work only in circumstances where a domestic demand has failed to develop, which in our case was the pre-1990s economy. By the late 1990s, it was clear that a significant change had taken place on the demand side of our economy, as folks were buying a lot of articles of commerce at a time of crisis. The middle class population is rising relative to the entire population, whose households’ needs have become more differentiated and have leaped beyond the bounds of ‘rice-and-galunggong’ expenditures. Today, Filipino families purchase around fifty-three percentum (53%) of their household needs from supermarkets, malls and large retail centers, even as the wet markets and sari-sari stores are declining in importance. These changes are real, and we cannot be blind to them by continuing to harp on an export-driven growth.

 

We must then fast-track large-scale redistribution schemes, such as to witness the rise in purchasing powers of our own people. This cannot be done outright during the next three (3) years, as we face a fiscal dilemma of crisis proportions. But beyond 2007 lies new opportunity fields. The fiscal route to stabilization will have been solidly achieved by then, and the nation can embark on more ambitious endeavors aimed at increasing incomes, reducing unemployment and poverty and increasing domestic consumption.

 

As the domestic market catches up in stabilizing the economy and producing national wealth, stakeholders shouldn’t be remiss in improving the competitiveness of our export products. Our great advantage is that we have ample supplies of skilled labor, with wages still relatively low. The power sector is also quite rich in supply of electricity, even as new projects are now being planned to neutralize possible supply problems in the short run. Hopefully, power supply would stabilize and electricity cost would decrease, contributing thus to rendering our exportable articles more competitive enough. Save for capital goods and petroleum, large volumes of which our producers continue to import, the other factors of production are within our hands to control and manipulate, inclusive of rent and interest rate. It is hereby argued that, with such factors controllable enough, we can optimize conditions for rendering our exportable articles maximally competitive and continue to permit the external market to be a source of substantial wealth. What more if we produce all of our essential capital goods, thus further bringing down the cost of production, given that the price of other factor inputs also go down?