‘Delay in PHL joining RCEP sends mixed signals to investors’

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THE Philippines’s delayed participation in the Regional Comprehensive Economic Partnership (RCEP) may be sending a signal of “inconsistency” to foreign investors, according to a Department of Trade and Industry (DTI) official.

DTI Assistant Secretary for Industry Development and Trade Policy Group (IDTPG) Allan B. Gepty underscored the importance of being consistent with how the Philippines attracts foreign investors.

“In terms of signal, [there is] some degree of inconsistency; internally, you have passed all these economic reforms—amendment of [Public Service Act] PSA, [Foreign Investment Act] FIA, and amendment to the [Retail Trade Liberalization Act] RTLA, basically telling the whole world, our investors, that our country is open. And then here you are when it comes to your participation to this very important free trade agreement, [there’s a] delay so of course we just want to be consistent,” Gepty told reporters on the sidelines of the 2023 Economic Outlook Forum organized by the British Chamber of Commerce of the Philippines (BCCP) on Tuesday in Makati City.

Gepty underscored the importance of the regional trade pact: it is the largest free trade agreement (FTA) in the world in terms of global trade, gross domestic product (GDP) and even market.

“RCEP region accounts for 33 percent of global inward foreign direct investment (FDI). This is a very important element. If you have 33 percent of global inward FDI, this means that the 67 percent FDI in the region are coming from non-RCEP countries or economies. That tells you that indeed, the investment destination is in the RCEP region,” Gepty said.

In contrast, Gepty said RCEP accounts for about 47 percent in terms of global outward FDI. This means that the member economies of the regional trade deal are also investing outside the region.

Meanwhile, the DTI official also noted that RCEP accounts to 50 percent of the global manufacturing output, 50 percent of global automotive products, and 70 percent of electronic products. He added that the main GVC [global value chain] hubs of RCEP are China, South Korea, and Japan.

With this, Gepty stressed, “That is why by its sheer price alone, the Philippines needs to be part of this important free trade deal.”

The Trade official also highlighted that Investors are waiting for the Philippines’s participation in the regional trade deal since the country’s accession to the pact has been up in the air for so long, Gepty said. Former President Rodrigo R. Duterte in September 2021 signed the ratification of RCEP, but it requires concurrence from the Senate before becoming fully effective.

However, the 18th Congress adjourned in June 2022 without the regional trade deal being ratified.

Now, Gepty said the regional trade deal is  with the Senate Committee on Foreign Relations as hearings will be conducted.

The Committee on Foreign Relations will, after holding hearings, submit a recommendation to the plenary where interpellations will be done. There will be  a technical working group to help identify issues, then concerned agencies will comment, “and then we will just follow up [on the next] hearing,” Gepty said.

Gepty said they hope RCEP will be approved by the Senate within the first quarter of 2023.

The Trade official said they recently met with concerned agencies and stakeholders to thresh out the issues and concerns of opposers to the ratification.

“And one thing that was very apparent in our exchanges is that basically the issues are not directly in reference to the agreement itself. That is one thing that we should take note of,” Gepty said.

“What needs to be done to address these concerns which are more focused on domestic programs, projects and also initiatives. For example, the anti-smuggling efforts. With or without RCEP, this needs to be addressed. And all efforts to enhance the anti-smuggling campaign must be welcomed,” he added.

While the Philippines has not yet ratified its membership to the RCEP, Gepty said the RCEP parties are already enjoying the benefit of having a wide area for accumulating raw materials. He said sourcing raw materials from the 14 members of the trade deal is “one big advantage” for the Philippines.