The Philippines should push for the conclusion of negotiations for the Regional Comprehensive Economic Partnership (RCEP) in this year’s annual Asean Meeting, as the deal could translate to better market access for its exporters than its existing free-trade agreements (FTA), the Asian Development Bank (ADB) said.
ADB Advisor at the Office of the Chief economist Ganeshan Wignaraja said the RCEP would not be like the usual trade pacts—especially for the Philippines—where the utilization rate of market-access agreements is only 22 percent.
He explained that because the RCEP covers many countries, including those that the Philippines does not have bilateral FTAs with, firms would have greater incentive to use the RCEP and benefit from it.
“When you get bigger agreements, bigger parties, such as [in the case of] RCEP, my expectation is utilization will rise because there’s more benefit to the firm to want to undergo the rules of origin,” Wignaraja told the Business Mirror.
Wignaraja also said he has high expectations for the RCEP, particularly its potential to harmonize rules of origins and tariff schedules across countries. However, the gains to be made in the RCEP, particularly where the Philippines is concerned, will not be immediate. He stressed that “FTAs alone cannot create exports”.
Along with efforts to push the conclusion of the RCEP, Wignaraja said the Philippines must implement domestic reforms to make it more competitive should the RCEP be signed. These reforms include improving infrastructure and social-safety nets, as well as technical and financial support for small and medium enterprises (SMEs).
Wignaraja said these will not only help SMEs take advantage of the RCEP, but also create mid-sized firms that are still missing in the production and supply chain.
The “missing middle” among firms has also prevented the Philippines from playing a greater role in the global value chain, whose importance is expected to increase in the near- to long-term.
Wignaraja said the Philippines has a lot of potential in the services sector, particularly in the business-process outsourcing industry and the tourism industry. Recent developments in the region, such as the warming of relations between China and the Philippines, could encourage some manufacturers to locate in the country.
In this way, the Philippines stands to benefit from the windfall of Chinese investments, and this is always good for a country whose foreign direct investments have not been that high.
Wignaraja said the conclusion of the RCEP would also make even the United States take a pause on its “America First” policy.
“The [country] has a wonderful chance in its chairmanship of Asean to try to push for a deal to be done, to be signed during its chairmanship and that would be a wonderful thing to achieve, a real feather in the cap of the Philippines,” Wignaraja said. “If RCEP gets done, it would be a very good signal to the world that the world is open for business, that Asia is open for business, and the Philippines has done it.”
The RCEP is a trade deal between the 10 countries of Asean, including the Philippines, and six other countries —Japan, South Korea, China, Australia, New Zealand and India.
Mar 16, 2017
Source: Business Mirror