Roxas rules out cash compensation for Singapore

Trade and Industry Secretary Manuel Roxas II said over the weekend the government will not compensate Singapore in the form of cash as a result of the Philippines’ continued tariff protection of its petrochemical industry.

"The Philippines is still validating the $3 million compensation that Singapore is asking for," Roxas said.

The Philippines, which had already been able to reduce Singapore’s initial demand from $38 million to $3 million, may even be able to bring down the amount further.

However, Roxas stressed, the Philippines will not agree to any cash payment but will merely agree to tariff offsetting for some petrochemical products which are not locally produced.

Earlier, the Philippines and Singapore arrived at a tentative agreement that was supposed to be finalized this month.

However, because of the validation process, a final agreement may still take some time.

Singapore’s request for compensation follows the Philippines’ decision to invoke an ASEAN protocol that allows member countries to temporarily exclude a particular industry from a lowering of tariff under the ASEAN Free Trade Area-Common Effective Preferential Tariff (AFTA-CEPT) scheme.

The AFTA-CEPT scheme which became effective this year requires all ASEAN member countries to bring down their tariffs from zero to five percent.

The Philippines is being careful about its response to Singapore’s compensation request since it would be the first test case and would set the precedent for all similar, future request under the AFTA.

The government invoked the ASEAN protocol to give more time for the local petrochemical industry to succeed even though several players have already been forced to shut down.

Government is still trying to revive plans to build a local naphtha cracker plant that would fully integrate the country’s existing upstream and downstream petrochemical industry.