Petrochem duty cut in Philippines to be reviewed

08-Sep-05

Finding the request by the Association of Petrochemical Manufacturers of the Philippines (APMP) reasonable, the Trade and Industry Secretary has agreed to review the decision of petrochem duty cut by the Cabinet-level Committee on Tariff and Related Matters (CTRM). This is the second time the Cabinet level CTRM decision was put on hold. The first was APMP's last minute effort to stop the issuance of the EO lowering the tariffs on 11 petrochemical items to 5% from 7%-10%, until JG Summit Petrochemical Corp. (JGSPC)'s naphtha cracker project goes onstream. JGSPC insists on tariff protection, terming it "crucial" to the viability of the country's first naphtha cracker plant. The Gokongwei owned 350,000 metric ton capacity proposed naphtha cracker plant would be operational by 2008. A review of the CTRM decision, indicates a reconsideration of the earlier decision, which is expected to raise be met with opposition from the downstream petrochemical industry. As per the Philippine Plastics Products Association (PPIA), the tariff differential between finished and raw plastics materials had forced the downstream petrochemical industry to downsize its operations leading to 20,000 jobs lost. The original overriding consideration by the Cabinet-TRM in upholding its decision was the impact of higher tariffs borne by processors and consumers leading to the burden of higher costs. The Cabinet TRM also maintained that a post-operative tariff protection would be granted once the JGSPC project goes on stream. The supposed issuance of this new order will supersede the EO 161 issued in 2003, suspending the implementation of the tariff reduction schedule adopted by Southeast Asian nations for petrochem under the AFTA. It will lower the CEPT rates tariffs of 11 petrochemical items excluded from the AFTA scheme to 5% from the existing 10%, including polyethylene (PE), polypropylene (PP) and PP with co-polymers, Expandable polystyrene (EPS), polyvinyl chrloride (PVC), plasticized and nonplasticized PVC.