The ASEAN Economic Community:
Challenges and Opportunities for
Philippine Maritime Manpower
Ramonette B. Serafica, Research Fellow
Philippine Institute for Development Studies
Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas
1
Outline
1. Status of the Philippines in achieving its commitments
towards an AEC.
2. Opportunities and challenges of ASEAN integration
initiatives to Philippine shipping services
3. Recommended initiatives to stakeholders to foster
competitiveness of Philippine shipping services within
the ASEAN region.
2
ASEAN Economic Community
ASEAN’s vision of
‘…a stable, prosperous and highly competitive ASEAN
economic region in which there is a free flow of goods,
services, investment and a freer flow of capital, equitable
economic development and reduced poverty and socioeconomic disparities” - AEC Blueprint 2007
2015 – target date of establishing the AEC
3
ASEAN Economic Community
Strategic Schedule of the AEC Blueprint (2008-2015)
AEC Pillar 1
•
•
•
•
•
•
•
Single Market &
Production Base
Free flow of goods
Free flow of services
Free flow of
investment
Freer flow of capital
Free flow of skilled
labor
Priority Integration
Sectors
Food, agriculture and
forestry
AEC Pillar 2
AEC Pillar 3
AEC Pillar 4
Competitive Economic
Region
• Competition policy
• Consumer
protection
• Intellectual
property rights
• Infrastructure
development
• Taxation
• E-Commerce
Equitable Economic
Development
• SME development
• Initiative for ASEAN
Integration
Integration into
the Global Economy
• Coherent approach
towards external
economic relations
• Enhanced
participation in
global supply
networks
Human Resources Development
Research and Development
4
How are services traded?
The supply of a service through any of four modes of supply:
Supplier Presence
Other Criteria
Service supplier not
present within the
territory of the
Member
Service delivered within the
territory of the Member, from
the territory of another Member
Service delivered outside the
territory of the Member, in the
territory of another Member, to
a service consumer of the
Member
Service delivered within the
territory of the Member, through
the commercial presence of the
supplier
Service delivered within the
territory of the Member, with
supplier present as a natural
person
Service supplier
present within the
territory of the
Member
Mode
(1) CROSS-BORDER
SUPPLY
(2) CONSUMPTION
ABROAD
(3) COMMERCIAL
PRESENCE
(4) PRESENCE OF
NATURAL PERSON
5
Example: Transport Sector (1)
Mode
Trade in shipping services
Trade in related services
Mode 1
Cross border
supply
An Indonesian ship is
Back office support
transporting cargoes on behalf
of an Indonesian
exporter to a Malaysian
importer in Malaysia
Mode 2
Consumption
abroad
Singaporean registered
Training schools;
shipping company may use an Maintenance and repair
Indonesian stevedoring
company to handle its cargoes
at Indonesian ports.
Source: Tongzon and Lee (2015) with additions
6
Example: Transport Sector (2)
Mode
Trade in shipping services
Trade in related services
Mode 3
Commercial
Presence
Singaporean shipping
company establishes a
branch in other countries
Foreign-sponsored training
centers; Philippine port
operator with a subsidiary in
another country
Mode 4
Presence of
natural persons
Filipino seafarer working on
a Singapore ship
Movement of transport
specialists (e.g., to provide
training or consultancy)
Source: Tongzon and Lee (2015) with additions
7
Two key agreements
Trade in Services – ASEAN Framework Agreement on Services (AFAS)
◦ Substantial removal of restrictions/discriminations
◦ Achieve progressively higher levels of liberalization
◦ AEC Blueprint targets
Movement of Natural Persons – ASEAN Agreement on the Movement
of Natural Persons (AAMNP)
◦
◦
◦
◦
Managed flow of natural persons
Greater transparency, streamline procedures
Encourage MRAs
Further Liberalization
Source: Reyes (2014)
8
AFAS Objectives
• to enhance cooperation in services amongst Member States in order
to improve the efficiency and competitiveness, diversify production
capacity and supply and distribution of services of their service
suppliers within and outside ASEAN;
• to eliminate substantially restrictions to trade in services amongst
Member States; and
• to liberalise trade in services by expanding the depth and scope of
liberalisation beyond those undertaken by Member States under the
GATS with the aim to realising a free trade area in services.
9
AFAS Targets
Completion Target
Scheduled Subsectors
Mode 1 (including horizontal)
Mode 2 (including horizontal)
Foreign Equity Limitation
(including Horizontal)
Mode 3 Market Access
Limitations (including
horizontal)
Mode 3 National Treatment
Limitations (including
horizontal)
15% flexibility
9th Package
AEM 2013
104
None (for all 104 subsectors)
None (for all 104 subsectors)
29 PIS: 70%
9 Log: 70%
66 Other: 51%
29 PIS: No limitations
9 Log: No limitations
26 Other: max 2 limit
26 Other: max 1 limit
10th Package
AEM 2015
128
None (for all 128 subsectors)
None (for all 128 subsectors)
29 PIS: 70%
9 Log: 70%
90 Other: 70%
29 PIS: No limitations
9 Log: No limitations
90 Other: No limitations
Max 3 lim/subsector
Max 1 lim/subsector
15%*(104*3)=
47 modes
Max 55% (26 subsectors) in 1
Mode
15%*(128*3)=
58 modes
Max 50% (29 subsectors) in 1
mode
10
ASEAN Agreement on MNP
Objectives
(a) provide within the scope of this Agreement the rights and obligations additional
to those set out in the ASEAN Framework Agreement on Services and its
Implementing Protocols in relation to the movement of natural persons between
Member States;
(b) facilitate the movement of natural persons engaged in the conduct of trade: in
goods, trade in services and investment between Member States;
(c) establish streamlined and transparent procedures for applications for immigration
formalities for the temporary entry or temporary stay of natural persons to
whom this Agreement applies; and
(d) protect the integrity of Member States’ borders and protect the domestic labour
force and permanent employment in the territories of Member States.
11
ASEAN Agreement on MNP
Scope
Agreement applies to measures affecting the temporary entry or
temporary stay of natural persons of a Member State into the territory of
another Member State. Such natural persons may include:
(a) business visitors;
(b) intra-corporate transferees;
(c) contractual service suppliers;
(d) other categories as may be specified in the Schedules of Commitment
for the temporary entry and temporary stay of natural persons of the
Member State.
12
Concept of ASEAN Single
Shipping Market (ASSM)
1. Foster free and fair competition in international shipping market.
2. Adhere to the principle of free competition on a commercial basis for
cargo movements between ASEAN member countries.
3. Remove or eliminate substantially all existing discriminatory measures to
market access among ASEAN member countries.
4. Exclusion of shipping activities reserved by each of the Contracting
Parties for their national flag vessels and/or shipping companies operating
in their respective domestic waters (cabotage).
5. Prohibit new or more discriminatory measures and market access
limitations.
6. Liberalize trade in maritime transport services by expanding the depth
and scope of liberalization beyond those undertaken by member countries
under the GATS with the aim to realize a free trade area in services.
Source: ASEAN Secretariat as cited in Tongzon and Lee (2015)
13
Impediments to a single shipping
market
1. Differences in national shipping capacity,
2. Different restrictive national shipping
policies and regulations, and
3. Differences in quality of port and shippingrelated infrastructure and institutions.
=> significant differences in international
competitiveness
Source: Tongzon and Lee (2015)
14
National shipping capacity (1)
National shipping capacity in the region is not evenly distributed.
Limited capacities except for Singapore, Malaysia, and Indonesia.
Most of the 10 ASEAN member countries highly dependent on foreign
shipping.
Top 25 in terms of flag registry (2010) – Singapore, Malaysia, and
Indonesia
Top 20 in terms of controlled fleets (2010) – Singapore and Malaysia
Singapore –
◦ Most shipping-dependent country in ASEAN, economy heavily dependent on
international trade
• The region’s maritime services hub, accounts for 7% of GDP, key component
of strategy as logistics hub
Source: Tongzon and Lee (2015)
15
National shipping capacity (2)
Philippines –
National shipping industry is highly concentrated with only five Filipino
shipping companies with only five Filipino shipping companies mostly
providing coastal liner services (accounting for 90% of domestic
shipping) and international tramp services.
Philippine-registered shipping fleet has continuously declined due to a
number of factors.
However, the Philippines is the largest supplier of highly qualified,
competent and certificated seafarers in the world (more than 300,000
deployed seafarers; 20% of supply; roughly US$ 2 billion in remittances).
Source: Tongzon and Lee (2015)
16
Restrictive national shipping
policies and regulations (1)
Region’s international shipping under Modes 1 and 2 is
generally liberalized.
ASEAN countries, except Singapore, are still adopting
restrictive national shipping policies and regulations under
Modes 3 and 4.
These restrictive policies and regulations are in the form of
market access restrictions, limitations specific to the
maritime sector and cross-sector foreign investment-related
barriers.
Source: Tongzon and Lee (2015)
17
Restrictive national shipping
policies and regulations (2)
Indonesia - restrictions are in the form of a requirement for foreign
shipping lines to appoint an Indonesian company as a shipping agent and a
foreign equity participation limit of up to 49% of the total equity in the
auxiliary shipping services sector, with the exception of stevedoring and
international shipping where up to 60% of the equity can be held by ASEANbased companies. 0 % in the case of customs brokerage.
Malaysia - liberalized all maritime services sectors (i.e., 100% foreign equity
participation) except for maritime cargo handling, towing and pushing, port
and waterway operation services, pilotage and berthing services, and
navigation aid services. Foreign equity participation for port ownership
allowed up to 49%.
Source: Tongzon and Lee (2015)
18
Restrictive national shipping
policies and regulations (3)
Vietnam - foreign equity share for Mode 3 allowed up to 100% in 2014 following
Vietnam’s WTO commitment. In terms of Mode 4, Vietnam’s national shipping
industry is still highly protected. Until now, VINAMARINE has only signed a
Memorandum of Understanding for the recognition of certificates with Singapore,
Indonesia, Brunei, and Myanmar but not with the other member states.
Philippines –
Foreign equity in port operation is restricted to 40%, which is lower than other
ASEAN states.
Foreign ships calling at Philippine ports are required to obtain tourist visas for their
foreign crew before disembarking their vessels. Negative List B bans foreign seafarers
from working domestically (except under certain circumstances).
Philippine registered ships in domestic and international trades are required to have
a Filipino complement on board.
Source: Tongzon and Lee (2015)
19
Differences in quality of port and
shipping-related infrastructure
and institutions (1)
Indonesia – terminal and storage congestions, low productivity in cargo
handling operation and insufficient drafts to accommodate larger mother
vessels with more than 6,000 twenty-foot equivalent unit (TEU) shipping
capacity
Malaysia – insufficient leadership in the field of logistics education; no
single platform or mechanism to share relevant shipping and port data (for
example, origin and destination data), absence of data base and lack of
usable and useful information
Thailand - lack of terminal capacity in the ports of Bangkok and Laem
Chabang; congestion in international container depots; underdeveloped
railway system puts more pressure on road transport; unnecessary long
procedures for business license application
Source: Tongzon and Lee (2015)
20
Differences in quality of port and
shipping-related infrastructure
and institutions (2)
Philippines -
Insufficient berth depth and poor port access due
to traffic congestions
Inadequate port infrastructure in other parts of the
country and inefficient domestic transshipment
system.
Lack of efficient shipbuilding industry forces
domestic ship owners to buy second hand vessels.
Source: Tongzon and Lee (2015)
21
Differences could further lead to
different economic outcomes
•Singapore, Thailand, Malaysia, and Indonesia
oHave competitive advantage in the international shipping
business as they are relatively endowed with shipping capacity
and resources
oExpected to benefit from a wider regional shipping market
under the ASSM with Singapore benefitting most in the
container shipping business.
•The Philippines, Vietnam, and other newly emerging
economies of ASEAN
oBenefit less or at worst, lose from a liberalized regional
shipping market
Source: Tongzon and Lee (2015)
22
Exports
Million USD
Exports of Transport Services (2014)
50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
44842
5724
4663
3791
2320
1744
417
Exports of Transport Services (Million USD)
Year Cambodia Indonesia Lao PDR Malaysia Myanmar Philippines Singapore Thailand Viet Nam
2010
264
2665
56
4880
148
1347
38705
5916
2306
2011
302
3456
51
5062
216
1424
42616
5830
2227
2012
334
3822
54
4425
194
1594
44591
5924
2070
2013
358
3611
70
4558
233
1637
44787
6146
2230
2014
417
3791
0
4663
0
1744
44842
5724
2320
Source: stat.wto.org
23
Benefits
Economic benefits will be in the form of ability to export shipping
services to the region under Mode 1 and under Mode 3 in terms of
enhancing regional commercial presence through greater investments
in more liberalized regional market.
Positive spill-over effects:
Increased demand for maritime manpower
As the shipping industries of the more developed members of ASEAN
expand their commercial presence in the region, they would be in need
of more seamen aboard their ships, more workers to man their
shipping-related overseas offices.
Philippines and Myanmar, should benefit in terms of increased demand
for seafarers, with substantial indirect employment effects on other
shipping related industries.
Source: Tongzon and Lee (2015)
24
The Philippine Opportunity
Filipinos have become the seafarer of
choice filling management positions
onboard ships and in ancillary services
ashore.
Opportunity to develop
◦ Maritime Cluster with a full suite of services to
the world
◦ Philippine National Flag Registry
Source: Magsaysay-Ho (2014) National Workshop on Services Manila, Philippines
25
The Philippine Maritime Cluster
proposal
• Ship management services
• Education and Training
• Surveys and Audits
- surveyors and auditors for certifying bodies like
Class societies, Insurance underwriters, P&I clubs,
Insurance adjusters
• Business Process Outsourcing
- business outsourcing services for shipping
companies, insurance companies and others
Source: Magsaysay-Ho (2014) National Workshop on Services Manila, Philippines
26
Roadmap
• Industry Roadmaps – Electronics, IT-BPM, PRC, etc.
• Vision and measureable goal
• Whole of logistics chain – dialogue with other stakeholders (domestic
and foreign)
• Global value chains – identify tasks where we have competitive
advantage; identify opportunities and strategies to move up value chain
• Identify and prioritize
• What, why – technology, expertise
• Who, where – firms, countries/markets
• Sustain competitiveness
•
•
•
•
•
Skills - Education, training
Standards & qualifications
Regulatory environment
Investment
Technology
27
Philippine Institute for Development Studies
Surian sa mga Pag-aaralPangkaunlaranng Pilipinas
Thank you
WEBSITE: www.pids.gov.ph
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policy research
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EMAIL: [email protected]
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Sub-sectors (corresponding CPC)
A.
Maritime Transport Services
Passenger transportation (7211); Freight transportation (7212);
Rental of vessels with crew (7213); Maintenance and repair of vessels
(8868**); Pushing and towing services (7214); Supporting services for
maritime transport(745**)
B.
Internal Waterways Transport
Passenger transportation (7221); Freight transportation (7222); Rental
of vessels with crew (7223); Maintenance and repair of vessels
(8868**); Pushing and towing services (7224); Supporting services for
internal waterway transport (745**)
H.
Services auxiliary to all modes of transport
Cargo-handling services (741); Storage and warehouse services (742);
Freight transport agency services (748); Other (749)
The (**) indicates that the service specified constitutes only a part of the total range of activities covered by the CPC concordance (e.g. Maintenance and
repair of vessels only a component of CPC item 8868).
29
PIS and LOG sectors
Priority Integration Sectors (PIS) – in 2003, 11 sectors were identified for
priority integration. Out of these 11 sectors, four are related to services,
namely: tourism, e-ASEAN, air travel, and healthcare.
Logistics (LOG) – in 2005, 12th PIS was added. Covers: Maritime cargo
handling (CPC 741); Storage & warehousing (CPC 742); Freight transport
agency services (CPC 748); Other auxiliary services (CPC 749) ; Courier
services (CPC 7512**); Packaging services (CPC 876); International
freight transportation excluding cabotage (CPC 7212); International rail
freight transport services (CPC 7112); International road freight
transport services (CPC 7213)
30