State-run policy think tank Philippine Institute for Development Studies (PIDS) has raised concerns over the Philippines’ performance in regional economic integration with the Association of Southeast Asian Nations (ASEAN), warning that nearly half of the targets under the Philippine Development Plan (PDP) 2023-2028 are unlikely to be met.

In a Dec. 23 discussion paper titled “ASEAN Economic Community through the Years: Benchmarking, Emerging Trends, and Future Pathways,” researchers from PIDS said approximately 46 percent of the current PDP’s targets are unlikely to be achieved, reflecting the country’s mixed performance in advancing regional integration. PDP 2023-2028 serves as the socioeconomic blueprint of the Marcos Jr. administration.

The report, authored by Francis Mark A. Quimba, Mark Anthony A. Barral, and Alliah Mae C. Salazar, noted that while the country has made strides in trade openness, macroeconomic stability, and human development, it continues to face significant challenges in sectoral productivity, climate resilience, and governance.

PIDS noted that the largest shortfalls in PDP targets are likely in agriculture, infrastructure, and social protection—key sectors for the Philippines’ regional and global competitiveness.

The think tank also emphasized that achieving the ASEAN Economic Community (AEC) Blueprint 2025 goals—which focus on integration, innovation, sustainability, and external engagement—requires not only alignment but also consistent performance across all key indicators.

The gap in performance is attributed to systemic governance issues, PIDS said, citing limited private sector dynamism and regional disparities in implementation.

The PIDS paper warned that with climate change, geopolitical fragmentation, and rapid digital disruption accelerating, a “business-as-usual approach” could undermine the Philippines’ ability to meet its ASEAN commitments and fully benefit from regional cooperation.

It added that while ASEAN has successfully deepened tariff liberalization and digital connectivity, intra-ASEAN trade and investment remain below their full potential, and equitable development remains the “most lagging pillar” due to persistent income gaps.

To address these challenges, PIDS urged policymakers to strengthen intra-ASEAN economic linkages, noting that harmonizing customs procedures, recognizing standards across countries, and implementing real-time digital logistics tracking could significantly cut costs.

The think tank also said the participation of micro, small, and medium enterprises (MSMEs) in ASEAN-wide production networks remains limited, calling for targeted technical support, easier access to financing, and regional certification schemes to help them scale up and integrate.

While average tariffs are falling, PIDS said non-tariff measures (NTMs) continue to create hidden costs, particularly in agriculture, pharmaceuticals, and electronics. It recommended reviewing these measures to streamline processes and align them with regional standards.

PIDS also suggested developing investment corridors in manufacturing, services, and agribusiness for ASEAN investors, emphasizing coordinated incentives and land-use arrangements among the Board of Investments (BOI), the Philippine Economic Zone Authority (PEZA), and local government units (LGUs).

On digital economy adoption, PIDS recommended fast-tracking domestic regulations, particularly on cross-border data flows, e-commerce taxation, cybersecurity, and digital identity, as ASEAN advances the Digital Economy Framework Agreement (DEFA).

The PIDS paper also called for boosting digital infrastructure in rural areas and improving government system interoperability through standards, open APIs, and cloud-based platforms, as well as implementing nationally coordinated digital skills programs with industry incentives to address low digital adoption among MSMEs and low- to middle-income groups.

It further recommended strengthening sustainable trade and investment by adopting carbon border measures, environmental, social, and governance (ESG) incentives, and green labeling aligned with ASEAN and European Union (EU) standards. Investments in renewable energy (RE), green infrastructure, and climate-smart agriculture were also highlighted as critical to boosting the country’s green products and services.

PIDS also urged public and private investments to assess climate risks and green growth potential, with the Public-Private Partnership (PPP) Center and the BOI coordinating a unified sustainability scorecard for proposed budgets. It added that the Philippines should actively participate in ASEAN-level climate finance initiatives, including the ASEAN Catalytic Green Finance Facility (ACGF) and the Sustainable Finance Taxonomy.

Finally, the think tank called on the private sector to deepen participation in regional supply chains, foster innovation through open collaboration, align ESG disclosures with regional norms, and support the green transition of supply chains.