At a recent meeting, all member countries of ASEAN called for faster economic integration, to move towards ASEAN as a single market as well as a single production base to improve the region’s global competitiveness to be able to compete against China and India. The 7 ASEAN countries include Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. The ASEAN Federation of Plastic Industries (AFPI), an organization of 7 ASEAN plastics manufacturing associations, has appealed to the Philippine government to proceed with tariff reduction on petrochemical and selected products to the level of 0-5% by January 2005.
With Malaysia finally withdrawing its request for tariff cover on its automotive sector, only the Philippines is left seeking protection for its petrochemical industry. However, the protection has not had desirable results, and has instead created a tariff distortion. The local downstream plastics industry has not benefitted by the protection, as the finished plastic products now cost less to bring in than the raw materials needed by the local plastics industry.
As a result of the distortion, the industry has lost about 20% or P1.6 billion of its former earnings. Seeking a further extension of the tariff protection would only result in the Philippine government having to compensate Singapore and perhaps Malaysia and Thailand. As Singapore has reportedly said that it would no longer agree to a mere off-setting agreement, but would seek cash compensation.