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The ASEAN Economic Community: Challenges and Opportunities for Philippine Maritime Manpower
Philippine Institute for Development StudiesSurian sa mga Pag-aaral Pangkaunlaran ng Pilipinas
Ramonette B. Serafica, Research Fellow
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Outline1. 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.
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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 socio-economic disparities” - AEC Blueprint 2007
2015 – target date of establishing the AEC
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 Competitive Economic
Region• Competition policy• Consumer
protection• Intellectual
property rights• Infrastructure
development• Taxation• E-Commerce
AEC Pillar 3 Equitable Economic
Development• SME development• Initiative for ASEAN
Integration
AEC Pillar 4 Integration into
the Global Economy• Coherent approach
towards external economic relations
• Enhanced participation in global supply networks
Human Resources Development Research and Development
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How are services traded?Supplier Presence Other Criteria Mode
Service supplier not present within the territory of the Member
Service delivered within the territory of the Member, from the territory of another Member
(1) CROSS BORDER ‑SUPPLY
Service delivered outside the territory of the Member, in the territory of another Member, to a service consumer of the Member
(2) CONSUMPTION ABROAD
Service supplier present within the territory of the Member
Service delivered within the territory of the Member, through the commercial presence of the supplier
(3) COMMERCIAL PRESENCE
Service delivered within the territory of the Member, with supplier present as a natural person
(4) PRESENCE OF NATURAL PERSON
The supply of a service through any of four modes of supply:
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Example: Transport Sector (1)
Mode Trade in shipping services Trade in related services
Mode 1 Cross border supply
An Indonesian ship is transporting cargoes on behalf of an Indonesianexporter to a Malaysian importer in Malaysia
Back office support
Mode 2Consumption abroad
Singaporean registered shipping company may use an Indonesian stevedoring company to handle its cargoes at Indonesian ports.
Training schools; Maintenance and repair
Source: Tongzon and Lee (2015) with additions
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Example: Transport Sector (2)
Mode Trade in shipping services Trade in related services
Mode 3Commercial Presence
Singaporean shippingcompany establishes a branch in other countries
Foreign-sponsored training centers; Philippine port operator with a subsidiary in another country
Mode 4Presence 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
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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)
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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.
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AFAS Targets 9th Package 10th Package
Completion Target AEM 2013 AEM 2015Scheduled Subsectors 104 128
Mode 1 (including horizontal) None (for all 104 subsectors) None (for all 128 subsectors)Mode 2 (including horizontal) None (for all 104 subsectors) None (for all 128 subsectors)
Foreign Equity Limitation(including Horizontal)
29 PIS: 70% 29 PIS: 70%9 Log: 70% 9 Log: 70%
66 Other: 51% 90 Other: 70%
Mode 3 Market Access Limitations (including
horizontal)
29 PIS: No limitations 29 PIS: No limitations9 Log: No limitations 9 Log: No limitations26 Other: max 2 limit 90 Other: No limitations26 Other: max 1 limit
Mode 3 National Treatment Limitations (including
horizontal)Max 3 lim/subsector Max 1 lim/subsector
15% flexibility 15%*(104*3)= 47 modes
Max 55% (26 subsectors) in 1 Mode
15%*(128*3)= 58 modes
Max 50% (29 subsectors) in 1 mode
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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.
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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.
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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)
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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 shipping-
related infrastructure and institutions.
=> significant differences in international competitiveness
Source: Tongzon and Lee (2015)
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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)
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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)
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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)
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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 ASEAN-based 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)
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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)
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Differences in quality of port and shipping-related infrastructureand 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)
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Differences in quality of port and shipping-related infrastructureand 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)
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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 ASEANoBenefit less or at worst, lose from a liberalized regional
shipping market
Source: Tongzon and Lee (2015)
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Exports
Year Cambodia Indonesia Lao PDR Malaysia Myanmar Philippines Singapore Thailand Viet Nam2010 264 2665 56 4880 148 1347 38705 5916 23062011 302 3456 51 5062 216 1424 42616 5830 22272012 334 3822 54 4425 194 1594 44591 5924 20702013 358 3611 70 4558 233 1637 44787 6146 22302014 417 3791 0 4663 0 1744 44842 5724 2320
Singa
pore
Thail
and
Malaysi
a
Indonesia
Viet Nam
Philippines
Cambodia
05000
100001500020000250003000035000400004500050000
44842
5724 4663 3791 2320 1744 417
Exports of Transport Services (2014)
Mill
ion
USD
Exports of Transport Services (Million USD)
Source: stat.wto.org
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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)
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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 RegistrySource: Magsaysay-Ho (2014) National Workshop on Services Manila, Philippines
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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
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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
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Philippine Institute for Development Studies
Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas
Service through policy research
WEBSITE: www.pids.gov.ph
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EMAIL: [email protected]
Thank you
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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).
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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)