Philippines to pay 50% of the estimated $5 million compensation to Singapore?

21-Sep-05

The Philippines may end up paying only 50% of the estimated $5 million compensation to Singapore on the petrochemical issue as records indicate that over 50% of the petrochemical imports in the past 2 years were granted duty-free status under the special government facilities. These petrochemicals were through special facilities of the government and were treated as duty-zero items since they are used as raw materials for re-export by enterprises registered with the Philippine Economic Zone Authority (PEZA). Though Singapore acknowledged the reduced compensation, its estimate was only 25% of the estimated total compensation. Aid will be sought from the Bureau of Customs and the National Statistics Office to prove the imports came in dutyfree. It could be recalled that Malacañang issued Executive Order 161 in 2003 suspending the implementation of the tariff reduction adopted by ASEAN for petrochem under the region's Common Effective Preferential Tariff (CEPT) scheme. (BCM) Under EO 161, tariff cuts on 11 intermediate petrochemical items were slowed down at 7-10% instead of the 0-5% agreed rate. Rate of finished products was maintained at 7-10%, while other Southeast Asian nations lowered their rates to 5% under the AFTA. The Philippine government has to compensate the ASEAN country considered as the hardest hit from the continued tariff protection. Singapore was the only ASEAN country that has objected to the Philippine decision and sought for compensation on its supposed losses from higher tariffs, which was estimated at $2.5 million annually or $5 million for the two year duration of the EO 161. The exclusion of the Philippines petrochemical industry from the CEPT schedule was good for two years only or until January 2005 but the local Association of Petrochemical Manufacturers of the Philippines (APMP) had petitioned the government for the extension of the tariff cover to 2010 in consideration of the planned naphtha cracker project of the JG Summit Petrochemical Corp., worth P25.6 billion, to be operational by 2008. Malacanang was to issue a new EO to put the petrochemical tariffs on track with the rest of the ASEAN after the Cabinetlevel Committee on Tariff and Related Matters (CTRM) upheld its earlier decision. But the entry of new Trade and Industry Secretary has delayed the tariff cuts again, as he agreed to the latest plea of the APMP to review the planned tariff cuts.