Europe firms prefer Philippines, Thailand for next FTA talks

MANILA, Philippines - The Philippines ranked next to Thailand as most favored destinations in Southeast Asia wherein European firms want the European Union (EU) to pursue a free trade agreement (FTA) with, but the country’s investment climate continues to be clouded by existing political system, government incentives and infrastructure.

The 2016 EU-ASEAN Business Sentiment Survey showed European companies chose the Philippines after Thailand as countries which they believe the European Commission should prioritize trade negotiations with following the conclusion of the EU-Singapore FTA and EU-Vietnam FTA talks.

Malaysia came next after the Philippines, while Brunei was chosen last.

European firms named protection of investments and intellectual property rights alongside the low-hanging fruit of tariff reductions as the benefits they value most from an EU FTA.

Almost two-thirds or 61 percent of the respondents indicated these FTAs would help their company, and only one percent said these agreements would hinder their trade and investment performance.

“This shows that European businesses want and expect high-quality, 21st century agreements that go beyond eliminating tariffs by extending protections for investors and innovators, and is reflective of the high bar that European agreements have set thus far, including the ones recently concluded with Singapore and Vietnam,” the report said.

When it comes to investment and ease of doing business, however, the Philippines received poor rating from European companies except for its workforce.

When companies based in the ASEAN-6 were asked to rate their satisfaction with a range of factors affecting their ease of doing business in their respective locations, the survey revealed that Singapore-based respondents were the most satisfied, reflecting its status as the most advanced economy in the region.

The Philippines ranked first when it comes to availability of competitively-priced labor, availability of skilled labor, and ease of recruiting labor from abroad.

The country ranked third among its ASEAN-6 counterparts when it comes to ease of importing goods, fourth in administrative costs for business, and fourth in fiscal structures.

However, the country was positioned last in terms of stable government and political system as well as in provision of government incentives.

It also fifth placed or second to the last on infrastructure, prevalence of business-friendly customs procedures and regulatory regime.

Overall, however, European businesses indicated bullishness on their prospects and expansion plans in the Philippines.

Some 59 percent of the European companies surveyed in the Philippines said they are eyeing to expand their operations over the next five years.

“It is clear that European businesses are optimistic and are investing for future growth in ASEAN. At a challenging time for the global economy, Southeast Asia is an economic bright spot and European companies are keen to invest in the region’s rapidly developing consumer market and increasingly integrated production base,” EU-ASEAN Business Council chairman Donald Kanak said.

The EU-ASEAN Business Sentiment Survey polled more than 200 executives from European companies around Southeast Asia.