Despite missed chances, ASEAN still good for RP

Conclusion

IT IS LITTLE WONDER that with the country’s poor showing in trade and investment, Philippine firms’ use of ASEAN free trade agreements to facilitate export sales pales in comparison to its neighbors’.

Only 20% of the 155 exporters from the food, electronics and automotive industries surveyed in 2008 said they take advantage of tariff cuts under the ASEAN Free Trade Area, a study by Ganeshan Wignaraja, principal economist of the Asian Development Bank’s office of regional economic integration, found. In contrast, the usage rate in Thailand and Malaysia is at a higher 25-27% range.

Low awareness of the tariff scheme, now streamlined under the ASEAN Trade in Goods Agreement implemented early this year, is primarily to blame for the poor usage rate, according to Mr. Wignaraja.

It is frustrating considering officials have toiled to negotiate such agreements, Bureau of Export Trade Promotions Director Senen M. Perlada said, adding that the government will continue its information campaigns.

But Manila would also do well to address the country’s attractiveness to export-oriented investments, Mr. Wignaraja said.

“Electricity cost is high and so is labor cost relatively. And the Philippines looks a little bit in need of infrastructure [such as] roads between economic zones and ports, airports and rail [systems],” he said.

It is this lack of competitiveness, reckons Federation of Philippine Industries President Jesus L. Arranza, that has so far prevented the Philippines from truly reaping the gains of the ASEAN free trade area.

“We’ve not benefited from it,” he said, pointing to the smaller market share local tiles, glass, and sanitary ware manufacturers now have against imports from Southeast Asia and elsewhere crowding the market.

The victims include local manufacturer AGC Flat Glass Philippines, Inc. — the country’s lone glass pane producer — whose 84% market share in 1998 figured glass sales contracted to 68% in 2002 according to Tariff Commission data. Safeguard duties on competing imports have since been imposed, a move which has been opposed by Thai exporter Guardian Industries Corp. and even the Thai government.

Despite this, industry leaders still contend the Philippines remains better off inside ASEAN than be left out of the bloc.

“Southeast Asia isn’t our main export market. But if we don’t join [the ASEAN] we will be out of the loop,” said Sergio R. Ortiz-Luis, Jr., Philippine Exporters Confederation president.

And for Mr. Wignaraja: “Overall, there has been net benefits for the Philippines being part of the ASEAN.”

Membership has allowed the Philippines to bag trade deals with China, Korea, India, Australia and New Zealand which it was unlikely to forge if it were negotiating on its own, he said.

“ASEAN’s real strength is its linking with the ‘Plus Ones’,” Mr. Wignaraja said, citing in particular the ASEAN-China deal which has created the world’s largest free trade zone.

It is these markets the Philippines must now target to fully take advantage of its ASEAN membership, he said.

Under the draft 2011-2013 Philippine Export Development Plan due to come out next month, the country seems to be moving towards that direction. While it retains traditional markets like the United States, Europe and Japan as key export destinations, the road map also prescribes directing marketing efforts towards China and India.

The plan also makes a pitch for luring investments that will entrench the country into the global supply chain already dominated by the two emerging economies.

“As a global player, the Philippines cannot afford to focus only on the domestic market alone or just its traditional trading partners,” Mr. Perlada said.

This should to yield more than a 10% increase in total export sales every year until 2013 under the plan.

At the very least, it will make it easier for the Philippines to declare its own success story at the next ASEAN anniversary.  –Businessworld