RP mulls shielding petrochemicals

RP mulls shielding petrochemicals

Martin Abbugao, Agence France-Presse, Bandar Seri Begawan

The Philippines sent notice Wednesday it may delay the
liberalisation of its petrochemicals industry, raising concerns
it could undermine the ASEAN Free Trade Area (AFTA) and hit
investor confidence in the region.

Philippine Trade Secretary Manuel Roxas informed AFTA's
council of economic ministers about Manila's intention to defer
the opening up of the nascent sector during a meeting in Brunei,
a move that raised concerns of backsliding on market-opening
commitments.

The council, which monitors commitments by the 10-member
Association of Southeast Asian Nations (ASEAN) to the free-trade
area, met on the eve of the ministers' annual gathering.

Under AFTA rules, countries may seek to temporarily opt out of
their commitments in sectors which they feel are not prepared to
face foreign competition.

Malaysia was the first member to invoke the mechanism to allow
it to delay opening up of its auto market. Negotiations are
underway with the most affected country, Thailand, on
compensation for potential losses.

In a statement issued after a meeting of the AFTA Council, the
ministers said they "noted the Philippines' intention to possibly
invoke the protocol" and added that "no consensus was reached and
further discussions will be carried out."

Roxas did not indicate when Manila would invoke the mechanism.

Ernest Bower, the president of the U.S.-ASEAN Business Council
which seeks to promote ASEAN to U.S. investors, earlier Wednesday
cautioned against more countries invoking the opt-out mechanism
after learning of Manila's intentions in press reports.

"We're more concerned (now) about these issues because part of
our concerns expressed in previous meetings with the ASEAN
economic ministers appears to be coming home to roost," Bower
told reporters.

He said Malaysia's decision to shield its auto industry would
"hinder world class investments" in ASEAN. Auto executives in the
United States have said they would prefer to see ASEAN as an
integral market, and not a market of 10 individual states.

Bower said more countries seeking to delay their free-trade
commitments would "undercut investors' confidence to move forward
in all sectors."

He said the message of U.S. business leaders to the economic
ministers was: "Please do not go down this trap of undermining
AFTA. Please hold the AFTA commitments and do not let countries
try to slip."

Singapore Trade Minister George Yeo said the ministers spent a
lot of time discussing the impact of the Philippines' move.

Yeo said Singapore would seek consultations once Manila
invokes the protocol because the city-state is the most important
Southeast Asian supplier of petrochemical products to the
Philippines.

But "our concern is not so much in the specific items involved
but with the signalling effect it will have on ASEAN as a whole,"
he said in a joint news conference. "And it is really the
signalling effect which we spent a lot of time discussing today."

Brunei Minister of Industry and Primary Resources Abdul Rahman
Taib dismissed the U.S. business leaders' concerns over possible
backpedalling.

"There is no question of backsliding as far as we are
concerned on AFTA. AFTA is on track," he said at the press
conference.

"There are problems that may arise from time to time and we
are dealing with the problems when they come," Taib added.

Roxas also defended his country's move.

"The Philippines remains committed to AFTA and within AFTA
certain protocols are available for countries such as the
Philippines to defer the submission of certain tariff lines into
the inclusion list," he said.

The ministers also pointed out that 96.24 percent of products
contained in an inclusion list for liberalisation have had their
tariffs cut to between zero and five percent this year among
ASEAN's six senior members -- Brunei, Indonesia, Malaysia, the
Philippines, Singapore and Thailand.

"So a particular country raising a concern or an issue does
not necessarily indicate backsliding by any measure," Roxas said.