By Carlos H. Conde
International Herald Tribune
Published: January 28, 2007
PAJAK, The Philippines: For the past four years, Raul Umpad has been making guitars by hand. Working under the shade of a mango tree, often without a shirt because of the humidity and heat, he smoothes the wood using sandpaper.
It’s a dreary job, Umpad said. And the pay, about $4 a day, is not so good, but it supports his jobless wife and their four young children. “It would be so easy to complain about the low pay, but I count my blessings,” Umpad, 38, said, rubbing sandpaper briskly on a piece of pear-shaped plywood.
Umpad said he derived satisfaction from seeing his guitars bought by foreign tourists, who travel to his village from the bustling central Philippine city of Cebu and from neighboring resorts. Pajak, about 12 kilometers, or seven miles, from Cebu City, is known for some of the Philippines’ finest guitars, many of which are for export.
When told that leaders of 10 Southeast Asian countries who gathered three weeks ago in a resort near here had agreed to accelerate the region’s drive toward becoming a free-trade zone like the European Union, Umpad asked: “Is that going to be good for us?”
The leaders who attended the summit, organized by the Association of Southeast Asian Nations, or Asean, drove home the point that creating a free-trade zone and an “Asean Economic Community” by the year 2015 would not only be good, but the only way to go.
Analysts and officials, however, have said that any serious attempt at an EU- like Asean should first address some of the issues that could undercut it: the huge income disparity among Asean nations, the political and cultural diversity and the lack of progress in many of these economies on trade liberalization, good governance, and human rights.
To Haruhiko Kuroda, the president of the Asian Development Bank based in Manila, it is not a chicken-and-egg situation. Southeast Asia, he said, should bridge the income gap before it can even dream of becoming as integrated as the European Union.
And such an integration could only happen, he said, if countries were able to take advantage of the numerous free- trade agreements that have already been signed or are under negotiation.
Asean countries, he said, “must chart a clear road map of a regionwide FTA,” referring to the leaders’ commitment during the summit of Asean and six other countries in Asia for a free-trade agreement in East Asia. This, he explained in an interview, would spur development and reduce income disparity.
Kuroda also underscored the need for Asean nations to improve their institutions and fight corruption, something that the World Bank echoed last week.
“Excessive inequity and weak institutions may be the motive of crime, violence, political instability and conflicts, which are all deterrents of economic growth,” FranÃ§ois Bourguignon, chief economist of the World Bank, said on a visit to Manila.
Corruption is a particular Asean weakness. Six of the 10 Asean countries â€” Laos, Vietnam, the Philippines, Cambodia, Indonesia and Myanmar â€” are among the 50 most corrupt states in the world, according to the 2006 Corruption Perceptions Index compiled by the corruption watchdog Transparency International, which surveyed 163 countries.
Experts have always contended that corruption has a tremendous impact on development. The perception of endemic corruption scares away foreign investors and “has a knock-on effect on economic growth,” said Huguette Labelle, chairwoman of Transparency International, at the announcement of the group’s 2006 rankings in November.
Then there is economic freedom. In its “2007 Index of Economic Freedom,” released last week, the Heritage Foundation ranked four of the Asean countries â€” Cambodia, the Philippines, Indonesia and Vietnam â€” as “mostly unfree”; two countries, Malaysia and Thailand, as “moderately free”; and two as “repressed”: Laos and Myanmar. Singapore, which has long been viewed as a partly authoritarian state, is No.2 on the global list as “free,” following Hong Kong. Brunei Darussalam, an Asean member, was not ranked.
This month, Freedom House, which monitors political freedom around the world, decried the declining state of freedom in several Asian countries. It singled out Thailand because of the military coup, the Philippines, not specifying a reason, and Myanmar for its crackdown on critics.
Myanmar, in particular, is seen as Asean’s Achilles heel and Yangon has been accused of not doing enough to improve its human rights record. “As far as Burma, or Myanmar, is concerned, we all see clearly that it’s not very helpful what the government there is doing as far as Asean is concerned,” Axel Raimund Weishaupt, the German ambassador to Manila, said Tuesday.
Myanmar’s human rights record, he said, could slow down Asean’s integration.
Others see the push for an EU-like integration, with the necessary disciplining mechanism, as precisely the kind of impetus Asean needs to make changes.
“For Asean to follow on that path would give Asean a stronger capability in addressing the issues of democracy, governance and integration,” said Alistair MacDonald, the British ambassador to Manila and head of the European Commission’s delegation in the Philippines.
The Asean Civil Society Conference, a network of activist groups in Southeast Asia that held its own “parallel summit” in Cebu, said that integration could be hampered by what it called a lack of transparency in most of the trade negotiations, the results of which, it said, could have a detrimental impact on ordinary people.
Ultimately, it said, the aim should be “genuine regional solidarity” rather than just economic integration.
Razeen Sally, the director of the European Center for International Political Economy, based in Brussels, is not a fan of an EU-like integration for Southeast Asia or East Asia, primarily because, in his view, trade integration is being pursued at the expense of trade policy reforms.
Sally argues that “trade policy matters more than trade negotiations.” But governments in the region, he pointed out in a paper released in December, “are acting as if it were the other way round.”
“They are relying too much on trade negotiations â€” particularly FTAs â€” while neglecting sensible trade policy reforms at home,” he said. This, Sally added, could hamper regional integration and economic progress.
Among these reforms, Sally said, are genuine and tangible liberalization, transparency in domestic laws and regulations in order to improve market access and competition.
Kuroda, of the Asian Development Bank, underscored this point in his speech before the leaders at the Asean Summit. Asean countries, he said, need to work harder to facilitate an effective cross-border movement of goods, services, capital, and people.
“Inadequate transport and communication infrastructure, uncompetitive transport and logistics services, and restrictive policies will all push up the cost of doing business in East Asia,” he said.
In other words, Raul Umpad should have no trouble exporting his guitars.
In fact, Alegre Guitars, the guitar company Umpad works for, used to sell its instruments abroad.
But three years ago, the company stopped exporting its products because of the high cost of shipping and the headache that went with it, said Tony Gorgonio, who runs the company’s guitar store. “The owners figured it wasn’t worth it,” he said.
Today, the guitar company survives on domestic buyers and the occasional foreign tourists.
“But think about the potential of this company,” Gorgonio said, “if we could access foreign markets much easier and cheaper?“
A smiling Umpad, who overheard the conversation a few feet away, nodded in agreement.