Government dangles tariff perks for petrochem investors

The government is still amenable to granting post-operative tariffs for possible investments in the petrochemical sector in spite of the Philippines’ participation in the ASEAN Free Trade Agreement-Common Effective Preferential Tariff (AFTA-CEPT) scheme, according to Bureau of International Trade Relations (BITR) director Ramon Vicente Kabigting.

In an open forum following his presentation at the 12th Term ASEAN Federation of Plastic Industries (AFPI) Council Meeting held at the New World Renaissance Hotel, Kabigting, however, warned that the extension of post-operative tariffs for investments in the petrochem sector would increasingly be difficult the longer such investment decisions are made.

The difficulty, Kabigting explained, is that once tariffs are lowered under the CEPT, it becomes harder to raise the tariffs again.

Under the AFTA-CEPT, ASEAN member countries have committed to bring down tariffs to zero by 2010.

Kabigting was responding to a question by a Malaysian participant asking about tariff protection for foreign investors interested in investing in the petrochem sector.

The Philippines had only recently agreed to reduce the tariffs on some plastic resins following the continued delay in a planned naphtha cracker project of JG Summit Petrochemical Corp.

However, the government had assured the proponent JGSPC that it would restore or impose post-operative tariffs once the naphtha cracker project finally materializes.

The Philippines had to finally bring down tariffs on some petrochem resins because of its commitment under the CEPT and the impact on its compensation scheme with Singapore which was adversely affected by the decision of the Philippines to maintain tariff cover on some of the resins.

The Philippines still owes Singapore close to $6 million in compensation for delaying the lifting of tariff on petrochemical products under the CEPT.

The Philippines, however, is hoping to show enough documentation to the Singapore government that out of the total $8 million due to Singapore, about 70 percent can be offset by duty-free importation of certain petrochemical products imported by some companies located in special economic zones.

The Philippines, so far, has paid about $2.1 million to Singapore through an offsetting arrangement, leaving an outstanding balance of close to $6 million.

A team from Singapore was suppose to meet with the Bureau of Customs (BoC) to verify documentation for the duty-free importation of certain petrochemical products.

Malacañang has issued Executive Order No. 316 way back in 2004 that would temporarily grant zero tariff rates on certain imported articles from Singapore as part of a compensation agreement with the island state over the delay in the Philippines’ lifting of tariff on petrochemical products under the CEPT scheme.