Gov’t action needed to spur firms’ use of regional trade agreements

The government should streamline export certification processes to dramatically boost Philippine firms’ use of regional trade agreements, experts from the Asian Development Bank (ADB) said. This will help firms cope with the downturn and catch up with counterparts in neighboring economies that are taking more advantage of Association of Southeast Asian Nations Free Trade Area (AFTA) mechanisms, they added at a presentation of a study yesterday. "The AFTA usage rate in the Philippines is 20%," Ganeshan Wignaraja, the ADB’s principal economist at its Office of Regional Economic Integration, said at the sidelines of the event, reiterating earlier reported results of a study he coauthored with ADB consultants Dorothea C. Lazaro and Genevieve DeGuzman. The team surveyed 155 firms from the food, electronics and automotive industries in 2008. "In Thailand, it is around 27% while in Malaysia it is 25-26%," Mr. Wignaraja told BusinessWorld, citing results from similar studies. The presence of larger firms and a more diversified export sector in other ASEAN countries could explain their higher usage rates but government support could likewise be responsible, Mr. Wignaraja said. "From our findings, a more pro-active approach to free trade agreements makes more sense for the Philippines," he said at the forum. The government should make it easier for exporters to obtain the needed certificates aside from tackling firms’ lack of awareness of the regional pact, Mr. Wignaraja said. The country should also consider negotiating for a reduction in the value content requirement -- a measure of how much of product components are locally made -- to 30% from 40%. Systems that will allow self- or third-party certification should also be implemented instead of having the Bureau of Customs being the sole authority. Local firms surveyed -- the portion that did not use the trade pact -- said they would more likely take advantage of the deal and thus increase the overall utilization rate to 54.2% from the 20% measured in 2008, the ADB study had found. -- Jessica Anne D. Hermosa, BusinessWorld