Investment bank exec eyes visible impact of ASEAN integration on PHL corporates by 2020

BDO Capital & Investment Corp. (BDO Capital) President Eduardo V. Francisco said impact of the regional integration on local corporates was not yet substantial. (Photo: BDO Unibank/ Facebook)

MACTAN ISLAND–The on-going economic integration in the Association of Southeast Asian Nations (ASEAN) is forecast to be widely felt in the Philippines by 2020 as more foreign businesses become more visible in the country.

BDO Capital & Investment Corp. (BDO Capital) President Eduardo V. Francisco said impact of the regional integration on local corporates was not yet substantial.

One of the areas set for integration is the banking system.

Republic Act (RA) 10641 or the Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines was passed into law in Jully 2014. It liberalized the domestic banking industry and allowed foreign financial institutions to open branches here.

Since then, nine foreign banks have opened branches in the domestic market.

Francisco said that while there were new bank entrants in the country “penetration is still very low.“

“We’re preparing. We’ve been preparing for it but we have not seen yet a major movement going in and going out,” he said.

Asked when a substantial change may be seen, Francisco said “maybe in two or three years.”

He explained that because of the strong domestic expansion in the country, along with the high liquidity environment, more companies were making money.

He, however, cited that if these companies start to feel that opportunities are diminishing, they might decide to expand overseas.

He said the ASEAN economy was now among the largest in the world and opening it for the 10-member regional bloc means a bigger market for businesses from the member-countries.

While this is an opportunity for businesses it also presents a bigger challenge because of cheaper imports.

He said only around 1,000 or less of the about 700,000 registered companies in the Philippines had the capacity to compete in the ASEAN but pointed that that these entities remained small compared to other players from the region.

“Our companies could also go bankrupt if we are not prepared. So there is a plus and a minus. But if you are ready to compete against the best of the best then suddenly you have a bigger market. That’s the potential,” he added.