ASEAN Economic Community and
the Philippine Banking Sector
…and what it means to Philippine Entrepreneurs
Marc Bautista, CFA
Head of Research, Metrobank
© 2012 Metropolitan Bank & Trust Company I Research Department I Strategic Planning Division.
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Framing The Issue
The Asean Economic Community (AEC) by 2015
• What is it?
• What is the impact to the Philippines?
© 2012 Metropolitan Bank & Trust Company I Research Department I Strategic Planning Division.
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ASEAN Economic Community (2015)
What are the aims?
• Single market and production base (free flow of
goods & services)
• Highly competitive economic region
• Region of equitable economic development
• Full integration to the global economy
© 2012 Metropolitan Bank & Trust Company I Research Department I Strategic Planning Division.
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Nominal GDP (2014)
USD Billion
17,419
13,391
10,380
4,616
2,060
United States
Euro area
China
Japan
ASEAN-5
Source: IMF World Economic Outlook
© 2012 Metropolitan Bank & Trust Company I Research Department I Strategic Planning Division.
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April 2015
STRATEGIC APPROACH
Single market and
production base
Highly competitive
economic region
FREE FLOW OF:
• Goods
• Services
• Investment
• Capital
• Skilled labor
• Priority Integration
Sectors
• Food, Agri, & Forestry
• Competition policy
• Consumer protection
• Intellectual property
rights
• Infrastructure
development
(transport, energy,
mineral, ICT)
• Taxation
• E-commerce
Region of
equitable
economic
development
Full
integration to
the global
economy
• SME
development
• Initiatives for
ASEAN
integration
• External
relations and
global supply
networks
© 2012 Metropolitan Bank & Trust Company I Research Department I Strategic Planning Division.
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5
Nominal GDP (2014)
USD Billion
889
374
327
308
285
186
Indonesia
Thailand
Malaysia
Singapore Philippines
Vietnam
© 2012 Metropolitan Bank & Trust Company I Research Department I Strategic Planning Division.
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PHILIPPINES
Source: Focus Economics Consensus Asia,
June 2015
© 2012 Metropolitan Bank & Trust Company I Research Department I Strategic Planning Division.
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PHILIPPINES
Source: Focus Economics Consensus Asia,
June 2015
© 2012 Metropolitan Bank & Trust Company I Research Department I Strategic Planning Division.
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PHILIPPINES
Source: Focus Economics Consensus Asia,
June 2015
© 2012 Metropolitan Bank & Trust Company I Research Department I Strategic Planning Division.
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PHILIPPINES
Source: Focus Economics Consensus Asia,
June 2015
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INDONESIA
Source: Focus Economics Consensus Asia,
June 2015
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INDONESIA
Source: Focus Economics Consensus Asia,
June 2015
© 2012 Metropolitan Bank & Trust Company I Research Department I Strategic Planning Division.
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INDONESIA
Source: Focus Economics Consensus Asia,
June 2015
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INDONESIA
Source: Focus Economics Consensus Asia,
June 2015
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THAILAND
Source: Focus Economics Consensus Asia,
June 2015
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THAILAND
Source: Focus Economics Consensus Asia,
June 2015
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THAILAND
Source: Focus Economics Consensus Asia,
June 2015
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THAILAND
Source: Focus Economics Consensus Asia,
June 2015
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MALAYSIA
Source: Focus Economics Consensus Asia,
June 2015
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MALAYSIA
Source: Focus Economics Consensus Asia,
June 2015
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MALAYSIA
Source: Focus Economics Consensus Asia,
June 2015
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MALAYSIA
Source: Focus Economics Consensus Asia,
June 2015
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SINGAPORE
Source: Focus Economics Consensus Asia,
June 2015
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SINGAPORE
Source: Focus Economics Consensus Asia,
June 2015
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SINGAPORE
Source: Focus Economics Consensus Asia,
June 2015
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SINGAPORE
Source: Focus Economics Consensus Asia,
June 2015
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VIETNAM
Source: Focus Economics Consensus Asia,
June 2015
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VIETNAM
Source: Focus Economics Consensus Asia,
June 2015
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VIETNAM
Source: Focus Economics Consensus Asia,
June 2015
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VIETNAM
Source: Focus Economics Consensus Asia,
June 2015
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Key Take-aways
• The AEC is to be regarded as a unit-whole that
– Has internal markets worth more than 2Tr USD
– Trades externally with other major economies
• Members of AEC actually trade more heavily
with non-AEC members
• There are as much opportunities as there are
threats
– Need to view the AEC as a “local market” upon
full-integration
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What has been done so far locally towards
integration?
• Easier access of foreign goods and services
(tariff reduction, easing of foreign ownership
rules)
• Steps to make local and export-oriented
industries more competitive
© 2012 Metropolitan Bank & Trust Company I Research Department I Strategic Planning Division.
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All ASEAN goods at 0% CEPT except for sensitive list
PHILIPPINE SENSITIVE LIST
CEPT
ITEMS
MFN (in-quota)
2010 2011 2012
2013
2014
2015
onwards
Swine (live & meat)
30
Poultry (live)
35
Poultry (meat)
40
Cassava
40
Sweet potatoes
40
Maize
35
Sugar
50
38
38
28
18
10
5
2012-2013 – 40
2014-2015 – 50
40
40
40
40
40
35
Rice
(highly sensitive)
Source: Tariff Commission
5
Only sugar & rice will experience
further tariff reductions until 2015
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Steps towards liberalization were made
Wholesale & Retail
Trade:
From 0% to 100% (2002)
Financial Services :
Banking Liberalization Law
of 2014
Transportation:
Removal of air route
restrictions, RORO to and
fro Indonesia, scrapping of
common carriers tax
Private Radio
Communication:
From 0% to 20% (2002)
Rice & Corn (culture,
prod’n & processing :
From 40% to 100% (2000)
subject to conditions
Gambling:
From 40% to 100% (2012)
subject to conditions
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However, 2015 won’t likely be a cliff
for the Philippines..
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Out of 19 target areas based on AEC aims, there are only
7 areas whose measures were all implemented by ASEAN as of
the latest AEC scorecard
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Compliance to AEC goals require major legislative action
70% foreign ownership requires Charter Change
Priority bills might take longer than 2015 deadline
Financial services liberalization will take place "with due respect for
national policy objectives
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No major shifts in trade performance until 2015
Zero tariff mostly
enforced in 2010
ASEAN countries
not among top 5
import sources
Current bilateral
agreements not
harmonized in the
region
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External Economic
Relations
Initiative to ASEAN
Integration
SME Development
E-commerce
Taxation
ICT
Mineral
Energy
Transport
Intellectual Property
Rights
Consumer
Protection
Competition Policy
Food, Agriculture,
and Forestry
Priority Integration
Sectors
Free Flow of
Skilled Labor
Free Flow of
Capital
Free Flow of
Investment
Free Flow of
Services
Free Flow of
Goods
Scorecard for 2008-2011
Brunei
Cambodia
Indonesia
Lao PDR
Malaysia
Myanmar
Philippines
Singapore
Thailand
Vietnam
ASEAN
Source: ASEAN Secretariat
Back to originating slide
All measures implemented
More than half of measures implemented
Less than half of measures implemented
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39
Based on an ADB study, only semi-integration is likely to
happen by 2020
ASEAN Banking Framework
Source: ADB. “Combined Studies on Assessing the Financial Landscape and Formulating Milestones for Monetary and
Financial Integration in ASEAN
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40
Alongside this, steps are being made towards ASEAN
Banking Integration by 2020
Equal ACCESS, TREATMENT, ENVIRONMENT
The goal?
• Regulatory harmonization and capacity building
• Less discrimination against foreign institutions
A medium to facilitate integration: Qualified ASEAN Bank (QAB)
• Member countries should facilitate access of QABs to their own
domestic banking market
• Probable minimum QAB requirements (still on the drawing board):
•
Capital adequacy requirements
•
Consolidation requirements and authority for consolidated supervision
•
Restrictions on large exposure
•
Accounting and transparency requirements
Source: ADB. “Combined Studies on Assessing the Financial Landscape and Formulating Milestones for Monetary and Financial
Integration in ASEAN
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Banking System Assets (2014)
USD billion
900
816
800
699
700
644
568
600
500
400
302
300
250
200
100
0
Singapore
Indonesia
Malaysia
Thailand
Vietnam
Philippines
*source:
central
data
of respective
countries
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Bankbank
& Trust Company
I Research
Department I Strategic Planning
Division.
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Key Take-aways on Banking
• AEC is local, so start from the immediate local
market – for Filipinos, that’s the Philippines
itself
• Important to partner with a bank that has
good national coverage, in any country within
the AEC
– Ease of transacting anywhere by business and AEC
Banks
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Metrobank Group (as of Mar 2015)
Largest Consolidated
Domestic Branch Network
Overseas Network Coverage
32
Branches,
subsidiaries,
offices
932
branches
Over
2,128
ATMs
125
Remittance
tie-ups
Over
190
Remittance
agents
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In Summary…
• AEC is a marathon… 2015 just marks the start of the
marathon
• Still a long way off towards full-integration… perhaps
2025 and up for “almost-full integration”
• Trade liberalization happened already in 2010 for the
Philippines
• QABs will happen earlier than expected full
integration, around 2019-2020, thus the need to
prepare businesses for AEC banking transactions
© 2012 Metropolitan Bank & Trust Company I Research Department I Strategic Planning Division.
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DISCLAIMER INFORMATION
The report above is circulated for general information only. The
opinions expressed are solely those of the contributors and are based on
prevailing market conditions and public sources that are believed to be
reliable. Metrobank and the report contributors/support staff do not make
any guarantees or representation as to the accuracy, completeness or
suitability of this report. The report may contain confidential or legally
privileged material and may not be copied, redistributed, or published
without prior written consent. Opinions or strategies contained in this
publication may change without prior notice and should not take the place
of professional investment advice or sound judgment on the part of the
reader.
END OF PRESENTATION
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