Franchisors see benefits in free trade deals

MANILA, Philippines — Filipino franchise brands going international and franchise brands entering the Philippines are seen benefiting from free trade agreements (FTAs) between the Philippines and other countries through lower importation costs.

Philippine Franchise Association (PFA) president Chris Lim told reporters on the sidelines of the Franchise Asia Philippines Expo 2023 that FTAs help because when a franchise brand goes international, it would have to send products from the Philippines abroad and vice versa when a brand enters the country.

“So free trade agreements help with that as it lowers the tariffs, it lowers the cost. Because the last thing you want is to bring in an international brand, and it becomes too expensive that people, the local consumers can’t buy it,” Lim said.

Among the recent FTAs that the country has forged include the Philippines-South Korea FTA.

In addition, the Regional Comprehensive Economic Partnership (RCEP) has also entered into force in the country earlier this year.

The Philippines also has other existing FTAs such as Philippines-Japan Economic Partnership Agreement (PJEPA) and the FTA with the European Free Trade Association (comprising Switzerland, Norway, Lichtenstein, and Iceland.

The country is also eyeing to forge an FTA with the European Union as both parties launched scoping discussions for the agreement, which is set to be concluded by the end of the year.

It is also looking at pursuing a Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates (UAE) as well as a Preferential Trade Agreement with India.

In August, Trade Secretary Alfredo Pascual said the government’s efforts to pursue more FTAs is seen to benefit micro, small and medium enterprises (MSMEs) in the country as it would increase their export competitiveness for them.

“FTAs means opening the market, particularly for our MSMEs,” Pascual said earlier.

Lim emphasized that anything that can facilitate trade, such as FTAs, helps the franchising sector.

While acknowledging the benefits of FTAs, Lim explained that the PFA continues to encourage supply localization.

“We encourage as much as possible when a brand comes in to localize even the supply base, not just because of course, partly because of cost, partly because of supply chain stability, but of course, if we have a brand here we want it to benefit downstream,” Lim said.

“That’s why franchising has so much backward linkages to agriculture. That’s why we have two million people employed in franchising both directly and indirectly, because we try to make sure now, we try to source local when we can,” he added.

He cited Jollibee and McDonalds as some of the big franchise brands that have a lot of backward linkages.

“And a lot of our brands, especially after the pandemic, realized how unstable it is if you have everything sourced internationally. And until now, you know, between exchange rates and inflation, the cost of importing can sometimes be a lot so you always try to diversify your supply chain,” Lim said.

The PFA officially opened its three-day Franchise Asia Philippines Expo 2023 Friday, showcasing around 1,000 brands.