Business World - 24 January 2021
RCEP seen highlighting PHL manufacturing weakness
By Jenina P. Ibañez
A recently signed 15-country trade deal may not significantly benefit the Philippine economy and instead expose its lack of competitiveness in manufacturing, a senior equities research executive for Regis Partners said.
“I think it will continue to highlight that we’re a lot less competitive in terms of manufacturing than our neighbors,” Regis Partners, Inc. Chief Strategist Rafael P. Garchitorena said, in response to a question at a German-Philippine Chamber of Commerce and Industry online event last week.
“If anything, it might make import prices lower which could tame inflation, but it will just highlight again the gap between our manufacturing competitiveness against the rest of the region.
The Philippines recently signed on to the Regional Comprehensive Economic Partnership (RCEP), which the Trade department aims to ratify this year. The trade pact includes China, Australia, New Zealand, Japan, South Korea and all 10 member-countries of the Association of Southeast Asian Nations (ASEAN).
The Trade department has been promoting the deal as advantageous for export market access, especially for garments, automotive parts, and agricultural products such as canned food and preserved fruit.
Mr. Garchitorena called the RCEP a “small net negative for the country.”
He said that Philippine participation in the trade bloc and the link with China is good for the country, but adds that it is difficult to say how it would translate to economic activity.
“The reality is (China is) now the growth engine of the world. Anything that gets us in that orbit is more likely better than none.”
The elements that reduce the competitiveness of Philippine manufacturing like the high costs of power or logistics challenges across the archipelago, he added, have nothing to do with open borders.
“RCEP is good. I don’t know if necessarily it will be a huge positive for the Philippines,” Mr. Garchitorena said.
RCEP becomes effective 60 days after six ASEAN member states and three other signatory states submit their instruments of ratification.
The Trade department is also seeking participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a deal signed by 11 countries in 2018.