According to Ramon Vicente Kabigting, director of the Bureau of International Trade Relations (BITR) and who heads the Philippine negotiating panel with Singapore, the Philippines is, and will, continue to pay Singapore compensation in terms of an offsetting arrangement, for the Philippines’ continued maintenance of a between seven to 10 percent tariff cover on 11 petrochemical products whose tariffs should have been brought down to five percent under the ASEAN (Association of Southeast Asian Nations) Common Effective Preferential Tariff (CEPT) scheme.
Kabigting disclosed that since 2003 when the request for exclusion from CEPT coverage was requested by the Philippines for the 11 petrochemical products, the Philippines has paid Singapore roughly $690,000 in compensation through the reduction of tariffs from three percent to zero for two petrochemical lubricating products.
While the agreement for compensation was reached in August or September 2003, Kabigting clarified the implementation of the offsetting was only done in January 2004 and the $609,000 figure only represents about half a year.
The government actually estimates that the tariff reduction on those two petrochemical products alone would result in foregone revenue of $2.5 million, Kabigting said.
The compensation deal with Singapore amounts to $3 million.
However, the government still needs to present a document to Singapore proving that such amount of petrochemical imports came into the country at zero tariff.
Furthermore, Kabigting said, the Philippines is also gathering pertinent import documents covering other petrochemical products which are used as raw materials by export processing firms that came in at zero tariff and should be considered as part of the compensation to Singapore.
The Philippines, Kabigting said, is trying to look for other petrochemical products whose tariffs the country can already reduce to further close the gap.
Unfortunately, Kabigting revealed, "we have looked at the old list and there does not seem to have room for further cuts."
Tariff protection for the 11 products was maintained upon the appeal of local petrochemical manufacturers who claim that the entry of such products, which they manufacture locally, would threaten their viability.
While there is only one remaining petrochemical manufacturer, the Association of Petrochemical Manufacturers of the Philippines (APMP) continues to lobby for the maintenance of the tariff cover on the 11 petrochemical products which are in turn the raw materials used by the downstream plastics manufacturer.