Singapore presses RP on supplemental deal for tariff compensation

Singapore is pressing the Philippines to sign a supplemental agreement extending the compensation agreement over the continued tariff protection being invoked by the latter for 11 petrochemical products, a trade official said.

The original compensation agreement covered only a year, from 2003 to 2004.

Even under that agreement, the Philippines has only been able to offset about $690,000 worth of petrochemical products covering one semester, Bureau of International Trade Relation (BITR) director Ramon Vicente Kabigting said.

Kabigting said Singapore wants the Philippines to sign a supplemental agreement covering this year.

He admitted Singapore is already a bit uneasy with the slow pace of compensation and with no clear Philippine government position on the petrochemical tariff. With the 2010 deadline fast approaching, the Philippines might not be able to fully compensate Singapore, he said.

Kabigting explained that on 2010, tariffs among ASEAN members will drop to zero, and there may no longer be any other product which can be used in the offsetting-compensation arrangement.

The Department of Trade and Industry (DTI), is now working with the Bureau of Customs (BoC) to gather additional documents which the Philippines can show to Singapore regarding additional raw material petrochemical resin imports used by some exporting companies located in export processing zones that could be added to the offsetting-compensation agreement.

The DTI is hoping to be able to gather enough import documents to offset at least another $2. 5 billion. The reduction of the tariffs on 11 petrochemical products to the ASEAN mandated rates of between zero to five per cent under the Common Effective Preferential Tariff (CEPT) scheme continues to hang as the Cabinet-level Tariff and Related Matters (CTRM) reviews the request of JG Summit Petrochemical Corp. (JGSPC) to maintain the tariff cover. The request is intended to protect the ailing Philippine petrochemical industry and allow JGSPC to put up a naphtha cracker plant that would result in a backward integration of the local petrochemical industry.