Singapore has agreed to deduct the value of the imported midstream petrochemical products by firms located in the economic zones. This deduction will come from the $8 million compensation package the Philippines has to settle with the island-state for option to exclude the 11 petrochemical products from the tariff liberalization under Common Effective Preferential Tariff (CEPT) scheme.
Singapore had demanded that Philippines must show proof that such imports came into the country duty-free. The local petrochemical industry claimed that out of the $ 8 million compensation, 70% came into the country duty-free as it was used by importers located in economic zones for processing and re exported. This means the Philippines has to compensate the remainder of at least 5% or $ 400,000 only. As per calculations by Singapore, only 25% of the $8 million was imported by economic zone firms, duty-free. Philippines is paying $ 690,000 for every 6 months ($ 2.1 million total) to Singapore since the scheduled tariff cuts on petrochemical products was suspended in 2003 leaving a total of $ 6 million more for the Philippines to settle down.
The trade conflict between the two ASEAN countries stemmed from the government's issuance of Executive Order 161 suspending for two years starting January 2003 the scheduled tariff cuts on midstream petrochemical products including resins and certain plastic products. Instead of lowering tariffs on 11 midstream petrochemical products to 0-5%, EO 161 maintained the tariffs at 7 to 10%.
In January this year, however, Malacañang issued EO 486 lifting the suspension on lowered tariffs on 11 mid-stream petrochemical products to a maximum of 5% from 7 to 10% without prejudice to raising tariffs again once a naphtha cracker plant is in commercial operation.
12-May-06 
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