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TheASEANIntegrationanditsImpactonLabor

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TheASEANIntegrationanditsImpactonPhilippineLabor

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Presented by Sonny Melencio during the assembly of UPAC (Union Presidents Against
Contractualization),CenturyParkHotel,ManilaonSeptember10,2014

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Introduction

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1.TherearemanyregionalagreementsinAsiaPacificthatimpactonregionaleconomicintegration
and trade policies. One of these agreements centered on the integration of ASEAN economies in
Southeast Asia composed of the ten countries of Singapore, Malaysia, Thailand, Indonesia,
Philippines,Brunei,Cambodia,Laos,Myanmar(Burma),andVietnam.

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2. The project for Asean Integration has been around since 2000, when the Asean Heads of State
SummitinSingaporelaunchedtheprogramcalledtheInitiativeforAseanIntegration(IAI)withthe
objectivesofnarrowingthedevelopmentgapbetweentheoriginalmembersofAseananditsnewer
members. The original members, sometimes called the Asean 6, are composed of Singapore,
Malaysia, Thailand, Indonesia, Philippines and Brunei. The newer members, the Asean 4, are
composedoftheCLMVcountriesCambodia,Laos,Myanmar,andVietnam.

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3. The Asean Integration specifically aims to integrate the transitional economies of the CLMV
countrieswhicharejustrecentlybeingassimilatedintotheglobalcapitalisteconomyledbytheearly
membersofAseanintheregion.

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4. The Asean Integration aims to develop an Asean Economic Community, patterned after the
European Economic Community, which later evolved into the European Union. The aim is to
establishasinglemarketandprobablyasingletradingcurrencyintheregionby2020.

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1.However,theintraAseantradeiscurrentlyatverylowlevel.Itconstitutesonlyabout25%oftotal
trade in goods of the Asean countries, and it is not expected to change dramatically in the near
future. For many years, the Asean countries have been trading more with nonAsean countries
compared to trading among themselves by a ratio of three to one. Comparatively, the European
Union has an intratrade level of 67.3% while the North American Free Trade Association (NAFTA)
hasarecordof48.7%intratrading.

2. There are other stumbling blocks to the integration. There are the three major factors of (a)
investment capital (b) technology and (c) industrial complementation. The first one, investment
capital, is miniscule among Asean countries. Investments can come from the big economic/trading
players in the region (China, EU, Japan, US, and South Korea). Technology is also not very high
among Asean countries, and technology transfer will require massive investment by the developed
capitalisteconomytoAsean.Thethirdfactor,industrialcomplementation,issomethingthathasyet
to be developed even among Asean countries themselves. In fact, the Asean economies have been
competingwitheachother.

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3.Inthissense,theAseanIntegrationisdefinitelyfarofffromthedreamofanAseanCommunity
andAseanUnionwhoseobjectiveistodevelopanindependentregionaleconomythatcancompete
in the international market and survive international competition. The Asean integration has since
then lowered its objective to establishing an integrated regional production base that will cater for
theinternationalmarket.

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1.Rightnow,theAseanIntegrationisaimedatintegratingthetransitionaleconomiesoftheCLMV
orthenewAseanmemberstobeabletoformanintegratedproductionbaseintheregion.Thereis
reallynoneedtointegratetheeconomiesoftheAsean6,astheyhavelongbeenundertheglobal
capitalist system and their economies have long been restructured to meet the needs of the global
marketunderaneoliberalscheme.

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2.WhatneedstobeintegratedaretheformersocialistorsocialistorientedeconomiesoftheCLMV
countries. Among the CLMV, Vietnam was the first country to join the Asean in 1995. Laos and
Myanmar joined two years later in 1997. Cambodia joined in 1998 following the stabilization of its
government.
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3. The CLMV countries are just emerging from previous socialistoriented economies into capitalist
mode. There are different levels in which they are restructuring their economies to fit within the
global economic market. Privatization of land and other economic assets, opening to foreign
investments, dismantling of stateowned and staterun enterprises, and reducing social welfare
projects and government subsidies are happening at different levels to accommodate the capitalist
model.

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4. It is no wonder that the Asean Integration is not only among Asean countries, but involves
formallythesocalledAseanDialoguePartners(ordonorcountries)includingChina,India,Japan,
Korea, Australia and New Zealand. These countries (especially the first four) represent the most
advancedcapitalistandmarketeconomiesintheregion.
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InitiativeforAseanIntegration(IAI)

1. In 2000, the Asean Heads of State Summit in Singapore launched the Initiative for Asean
Integration (IAI) with the objectives of Narrowing the Development Gap (NDG) and accelerating
economicintegrationofthenewermembersofAsean.Theintentistointegratethesetransitionalor
emerging economies to the capitalist economies of neighboring countries in Southeast Asia. Their
integration into the global capitalist system will be based on a capitalist restructuring scheme that
hasbeenimplementedinthesecountriessincethe1990s.

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2. The integration was driven mainly by the IAI Work Plans (IAIWP). There have been two work
planssince2002.

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TheIAIWorkPlan1(covering20022008),whichwasendorsedbytheLeadersatthe8th
AseanSummitin2002,addressedthesoftinfrastructureneedsoftheintegration,including
prioritiessetting,humanresourcedevelopment,andsystemsinpoliciesfortrading,customs,
tradestandards,andinvestments.

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ThesecondIAIWorkPlan(20092015),whichwasendorsedin2009atthe14thAsean
Summit,focusedonhardinfrastructurebuilding.Thisincludesthedevelopmentofphysical
transportandcommunicationnetworks,andcompletionofthephysicalroad,rail,airandsea
linkageswithinASEAN.ExamplesofthesearetheSingaporeKunmingRailLinkwhichwill
connectSingapore,China,ThailandandtheCMLVcountriesandtheairtransport
liberalizationlinksundertheBIMPEAGAproject(Brunei,Indonesia,Malaysia,PhilippinesEast
AseanGrowthArea).

DecemberJanuaryIssue

Twoparallelstructures

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1.Toacceleratetheintegration,twoparallelstructuresweresetup.
NovemberIssue

2. The first layer was the Asean Summit or the annual meeting of the top officials of the Asean
countries. The Summit provides overall guidance and advice on the implementation of the
integrationplan.TheAseanCoordinationCouncil,theIAITaskForce,andtheAseanSecretariatare
bodiessetupbytheSummittoactasrecommendatoryandimplementingbodiesoftheintegration
asawhole.

3. The second layer was the IAI Development Cooperation Forum (IDCF) which was established in
2002 to engage ASEAN's Dialogue Partners and other donors in a collective dialogue on the work
plans.TheIDCFissetuptoensurethatthebigcapitalisteconomiesintheregion(andintheworld)
willbeabletointerveneintheASEANintegrationscheme.

4. The IDCF was held in 2002 with 270 representatives from Asean member countries and its
dialogue partners, together with 27 international and regional organizations, as well as 17
international and regional corporations and foundations. The Dialogue Partners included China,
India, Japan, Republic of Korea, New Zealand, and the UNDP. There were also pledges of support
from Germany, the ADB, Japan Bank for International Cooperation (JBIC), Asean Centre for Energy
(ACE), the Asean Foundation, Hanns Seidel Foundation (HSF), the Colombo Plan, Oxfam, Petronas
of Malaysia, IBM and RITES Consultancy of India. The United States interest is represented in the
internationalcorporationsandfoundationswhicharealsopartoftheDonors.

Focusofintegration

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1.Theintegrationisfocusedonsevencomponentsthatensuresfreetradeandthepromotionofa
single market and production base. It consists of the following: free flow of goods, services,
investment, capital, and skilled labor development of priority integration sectors and
competitivenessoffood,agriculture,andforestrysectors.
2.Thereare11priorityintegrationsectorswhichconsistofthefollowing:
Agrobasedproducts
Fisheries
Woodbasedproducts
Rubberbasedproducts
Textiles&Apparels
Automotive
Electronics
AirTravel
Tourism
ASEAN(ICT)
HealthCare

ILOandADBstudy

1.Accordingtoarecentstudy(2014)madebytheInternationalLaborOrganizationandtheAsian
Development Bank (ASEAN Community 2015: Managing integration for better jobs and shared
prosperity),ifallgoeswell,theAseanEconomicCommunitycouldgenerate14millionjobsby2025
andimprovethelivelihoodof600millionpeopleacrossall10Aseanmemberstates.Whilethestudy
pitches a positive note, the 14 million projected jobs within 10 years from the AEC launching in
2015isameaslyfigure.Unemploymentwillstillhoverat100millionfigure.

2.Currently,Aseanstotalgrossdomesticproduct(GDP)stoodatUS$2.4trillion,representingabout
3.3 percent of the worlds economy, with a labor force of some 300 million people. Some of the
backgrounddataconcerningtheAseanlaborforce:

Theaverageunemploymentrateintheregionrunsat4.2%.(Philippineshasthehighest
unemploymentrateof7%.
Theresa13%averageyouthunemploymentrate(thehighestareinIndonesiaat21.6%and
inthePhilippinesat16.6%).
179millionpeople(59.6%)areinvulnerableemployment(definedasthesumofown
accountworkersandfamilyworkerswhohavenoformalworkarrangementsanddonot
enjoyregularlaborbenefits).
117millionpeople(39%)arewageandsalaryworkers.
92millionpeople(30.6%)liveinpoverty.

2025projections

1.TheILO&ADBstudysaidthattheAECcouldraisetheGDPoftheregionasawholeto7.1per
centby2025.However,theclincheristhatwhileitwillcreatejobs,itwillalsodestroyothers.There
will be 14 million net jobs in ten years, but even this will be hampered by job losses that will
accompanytheintegration.

2.Theoverallnetjobgainputat14millionby2025followingtheimplementationoftheAECwill
come from trade, transportation, and construction. Currently, 40 per cent of workers in the region
arecategorizedaslowincomeworkers,mostlyemployedintheagriculturesector.Theprojectedjobs
by2015arealsolowincomeinnature.

3. The study also noted that the job gains will be uneven, and will vary by country, sectors, and
gender.Thesewillnotbedistributedevenlybetweencountries,economicsectorsorbetweenwomen
andmen.ThestudyfoundthattherewillbefewernewjobsforwomeninthenewAseanEconomic
Community, with many of those jobs possibly being in sectors that are vulnerable and informal
leadingtogreaterinequalities.

Laborconcerns

1. Can the Asean Economic Community provide increased employment and higher income for the
workersintheregion?

2.Basedonthestudy:

ThePhilippinesprojectedgrowthisonlowskillemployment.

Therewillbefewernewjobsforwomen,possiblyinsectorsthatarevulnerableandinformal

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leadingtogreaterinequalities.

TherewillbeincreasingmigrationbetweenAseancountriesdrivenbydemographicandwage
disparities.Mediumandlowskilledworkersmorelikelytomigrateduetohighdemandof
construction,agricultureanddomesticworkers.

3.Onthe11priorityintegrationsectors(seeFocusofintegration,#2):

ThetopAseancompaniesonagrobasedproducts,fisheries,andrubberproducts,will
continuetodominatesaidindustriesintheregion.ThebigfirmsarefromSingapore,
Indonesia,Malaysia,Thailand,andVietnam.Currently,vegetableoilsandrubberproducts
constitutehalfofthetotalexportsofAseancountries,followedbyfish&preparations,then
riceandcoffee.Philippinesdoesnotexportrubber,riceandcoffee.

Textile&apparelandthefoodindustrywillmorelikelyshifttoCLVcountries(Cambodia,
Laos,Vietnam).

TheautomotiveindustryleadersintheregionareMalaysiaandThailand.Malaysiahasa
highlyprotectivecarindustry(thestateownedcarProton)andvehiclepartsindustries
competingwithThailandsTR(Thairung).However,outsideofthesetwoAseancountries,the
carindustrywillcontinuetobedominatedbyJapanandSouthKorea.

Philippines:netloser

1.ThePhilippineswillnotbeanetgainer,tosaytheleast,intheAEC.Therewillalsobeadeclinein
thechemicals,mining,electricalequipments,andmachineryindustriesinthecountry.

2. While the Philippines will find it hard to compete in the agrobased business, and the other
priority integration industries, the country will be in the receiving end in the sugar industry. It is
expectedthattherewillbemassivejoblossesinthesugarindustrynextyear.

3. According to the Sugar Regulatory Administration (SRA), the implementation of the Common
Effective Preferential Tariff scheme under AFTA in 2015 will imperil the livelihood of about 60,000
sugarfarmers&600,000sugarworkersinthecountry.Thedecreaseonimportedsugartariffto5%
(from 18%) will result in an influx of imported sugar and consequently lower the mill site price of
locally produced sugar. Affected are the 10 major sugar producing regions in the country: Negros
Occidental, Bukidnon, Batangas, Negros Oriental, Iloilo, Tarlac, Capiz, North Cotabato, Davao del
Sur,andCebu.

4. Finally, in the onemillion dollar question on who is best prepared for the Asean Economic
Communityandwhowillbehardesthitoncetheagreementtakeplace?

5. According to the study, while its a very difficult question to answer, the report shows that
Cambodia, Laos, Myanmar and Vietnam (CLMV), who are often perceived as lagging behind are
actuallyverywellprepared,withArjunGoswamifromtheAsianDevelopmentBanksayingtheCLMV
arehungry,theyarereadyforthis.

6.TheCLMVwillbenefitintheintegrationbecauseoftheirextensiveagriculturalandaquaticfarms
and resources (which are the top sectors in the integration), and their relatively cheap, and
educated/skilledlabor.

ArewereadyforAEC?

1.ThePhilippineDailyInquirerseditorialonAugust27,2014,raisedarelatedquestion:Howready
are Philippine companies for the AEC? Two sectors that are expected to face difficulties are
agriculture and financial services. On agriculture, the local sugar industry is highly vulnerable to
competitiononcetariffisslashedtoonly5%in2015(from18%in2013).

2. Standard & Poor, an investment firm, believes that Philippine banks are also not yet ready.
Althoughprofitableandstable,theyhaveamuchsmallerbusinessscalecomparedwiththeirregional
counterparts.Theassetandcapitalsizeofthecountrysbankingsystempaleincomparisontothose
intheregion:

nThetotalassetsofallPhilippinebanksareequivalenttoonlyonebigbankinMalaysia.
n The combined assets of the 3 biggest banks in the Philippines would approximate one bank in
Thailand.
n The total capitalization of the entire Philippine banking system would be the size of just one
Singaporeanbank.

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3.Accordingtotheeditorial,onereasonforthePhilippinebanksincapacitytocompetewithother
regionalbanksisbecauseofthe40%constitutionallimitationoninvestment.Comparethiswiththe
99% open investment in Indonesia, the lack of hard limit to foreign ownership in Malaysia and
Singapore,andaflexibilityclausethatallowsforeignownershipbeyond50%inThailand.

4.ButtheproblemwiththePhilippinebanksisnotitsforeignshare(Philippinebankinghavealready
beenliberalized).Besides,almostalltopFilipinomultibillionairesoperatebanks:

HenrySyofBdOAbotizofUnionBank
LucioTanofAlliedBank/PNBYuchengcoofRCBC
GeorgeTyofMetrobankEricRectoofPBC
RobertoOngpinofPBCFrederickDyofSecurityBank
ZobeldeAyalaofBPIOthers

5. The problem is that the elite who are also owners of the big banks do not put their money and
capital in the Philippines a large chunk is invested abroad. They make use of ordinary people's
savings to finance their projects here or join up with big foreign corporations to control Philippine
industries(ex.MVPGroupstieupwithSalimGroupofIndonesia).

Takestockofoursituationfirst

1.WewillnotbeagainerintheAEC.Asinanytradingendeavour,thegainerswillalwaysbethose
whohavethemostcapital,technicalknowhow,andthosewhohavetheinfrastructurestodominate
thefieldthebigplayersorthebigcorporations.Allthehullabaloosaboutitbeingadvantageousto
thesmallplayersaremerepropagandadesignedtomakethistypeoftradingagreementsacceptable
toall.

2.BeforeweenterintothecompetitivefieldofAEC,wehavetotakestockofoursituationfirst.We
havetosolveourownproblemsfirstandlookatsolutionsavailabletousinorderthatwebecomea
strongereconomicforce.

3.Thatmeanswehavetosolvetheproblemsof:

Unemployment.ThePhilippineshasthehighestunemploymentrateinAsean,includingyouth
unemploymentwhichisthe2 nd highestinAsean.
Poverty.26.5%ofFilipinoslivedonlessthan$1aday(2009),apovertyratethatwas
roughlythesamelevelasHaitis.
Lackofeducationduetopoverty.Philippineshasthehighestproportionofchildrenoutof
school(11.4%).
Hunger&malnourishment.32%ofchildrenunderage5aremalnourished(UNICEF).

4.Thesearealreadyseriousproblemsforthecountryandyet

ThePhilippinesspenttheleastoneducation(2010)at2.65%ofGDP.Indonesiaspent
2.77%.Thailand,5.79%.Malaysia,5.94%.
Philippineinvestmentsininfrastructure(includingPPPs)constituteonly2%ofGDP
comparedtoabout5%inneighboringcountries.Thegovernmenthaslineduponly56PPP
ininfrastructurebutthegovernmentcanincreaseitsOWNspendinginthissector.(ADB
PresidentTakehikoNakao)
Littleinvestmentinqualityeducationandinpublichealth.
Philippines,togetherwithLaosandMyanmar,hasthelowestcommitmentonsocial
protectionamongAseancountriesatlessthan2%oftheirGDP.HighestisThailand(7.2%of
itsGDP).

5.Thecountryisincrisisandyet

Thecollectivewealthofthe40richestFilipinofamiliesgrewfrom$13billionin2010to
$47.4billionin2011(anincreaseof37.9%).Theincreasedwealthofthesefamilieswas
equivalentinvalueto76.5%ofthecountrysoverallGDPatthetime(ForbesAsia,2012).In
Thailand,the40richestfamiliesincreasedbyonly25%ofthenationalincomegrowththat
year.Malaysia,by3.7%andJapan,by2.8%.

Banking,telecommunications,andpropertydevelopmentarealmostentirelymonopolizedby
afewelitepoliticalfamilies.Twofamilieshadacombinedwealthof$13.6billionor6%of
theGDP.Onepercentofthepopulationownorcontrol70%ofthenationalwealth(Preda
Philippines).TheincomedisparityinthePhilippineswasthehighestinAsia.

Mainstumblingblock

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1.ItisclearthatthemainstumblingblockformakingthePhilippineeconomyviableintheregionis
thePhilippineelitesdominationandmonopolyoftrade,industriesandresourcesinthePhilippines.
Thisisthecauseofhugeincomedisparityamongthepopulationinthecountry.

2.Thestrengtheningofthesmall&mediumenterprises(SMEs)mightbeanalternativetotheelites
dominationandmonopolyofeconomicresourcesinthePhilippines.

3.InthePhilippines,theSMEsaccountforroughly99%ofFilipinofirms.Buttheyaccountforonly
35% of national output a sharp contrast with Japan & Korea where the same ratio of SMEs
accountsforroughlyhalfoftotaloutput.Thistranslatesintofarfewerhighpayingjobsonthelocal
level for Filipino employees and exacerbates the huge income disparity across the country. (PDIS,
Phil.InstituteforDevtStudies).

4. The SMEs have been allowed to participate in the Asean integration, and are projected to be
beneficiaries of it, but according to Trade Secretary Gregory Domingo, the current rules and
regulationsgoverningfreetradeagreementsandotherbilateralagreementsarelargelymeantforthe
bigcompanies.EventherequestforSMEsintheindustriesofgarments,handicraftandfurnitureto
beallowedtoskipcertainapplicationprocessesforeasieraccesshasnotbeengranted.

Corruptionandotherills

1. Elite domination of the economy and politics in the country begets corruption. In 2012, the
Transparency International ranked Philippines number 105 out of 176 as one of the countries with
highlevelofcorruption,tiedwithMaliandAlgeriaamongothers.

2. Also because of monopolies, corruption, substandard infrastructure, and high electricity/power


costs, investments are down in the Philippines. The Philippines investmenttoGDP ratio stands at
19.7%comparedto33%inIndonesia,27%inThailand,and24%inMalaysia.

3. Meanwhile, OFW remittance amounts to $8 billion yearly. In 2013, FDI was $3.9 billion only
(considering that it was the highest FDI reported in the country during the administration of
PresidentNoynoyAquino.

WeneedanALBAtypeofeconomicintegration

1.Giventhecharacterofourcrisis,wewillnotbeabletosurviveundertheAEC.Infact,wedonot
needanAEC.Itisaneconomicagreementthatisonlyadvantageoustobigcorporations,theFilipino
eliteandthetrapos.

2.Weneedadifferenttypeofintegratedeconomythatwillsupportourneedsasapeopleandasa
nation.Anintegrationfoundednotonprofitandcompetitionforthebigplayersbutforthecommon
goodofthepeopleeverywhere.

3.Thereissuchanintegrationhappeninginotherregion,specificallyinLatinAmerica.Thisisthe
agreement that constitutes the ALBA, the Bolivarian Alliance for the Peoples of America led by
Venezuela,Bolivia,Ecuador,Cuba.

4.ALBAwasestablishedasanalternativetotheFreeTradeAreaoftheAmerica(FTAA)whichisan
agreement that is beneficial only to the big corporations in the United States. ALBA initiated and
promoted the Peoples Trade Agreements with the Caribbean nations of Antigua and Barbuda,
Dominica,St.VincentandtheGrenadines,andSt.LuciaundertheALBATCP.

5. ALBA and its trade agreements promoted genuine economic cooperation and development, not
free trade and competition, as the centerpiece of economic relations among countries. ALBA
promotesanalternativesocialistsystemofintegrationasopposedtoanintegratedcapitalisttrading
system.

Whatarewegoingtodo?

1.PrepareformorejoblossesanditsnegativeimpactinthePhilippineeconomy,especiallyamong
theworkingclass.

2.Prepareforheavycompetitiononservicesindustry,includingICT.

3.Preparefordecliningwages.

4.Prepareforincreasingexportoflaborcoupledwithcompetitiveentryofforeignworkers

Bestimmediateresponse

1. The best immediate response is not only through an NGO type of response around institutional

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engagement,trilateraldialogues,safetynets.

2. The best immediate response is the defense and protection of our rights through struggle and
mobilization. It means real, genuine campaigns. It means solidarity, not competition, with the
workingclassesespeciallyintheASEANregion.

3. Ultimately we have to fight for political power to establish a system that can withstand big
corporatecontrolanddomination.Theultimatesolutionliesinbringingdownthecorruptcapitalist
regimeandestablishingthegovernmentofthemasses.#

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