The Philippines is eyeing the entry into force of a free trade agreement (FTA) with South Korea next year, with the bilateral pact seen benefiting local banana and processed pineapple exporters in the form of reduced tariffs.
Trade and Industry Undersecretary Ceferino Rodolfo told reporters last week that the signing of the agreement in November would hopefully push through after a meeting with South Korean government officials later this week.
“We’re done with the legal scrubbing. I will be going to Korea on Oct. 14 to 17 for a joint economic committee [meeting], but that also includes meeting with my counterpart for the FTA to prepare for the signing,” said the trade official.
Rodolfo said the Philippines’ priority interest in the FTA would be on the exportation of banana and processed pineapple to South Korea, adding that these goods were being levied a 30-percent tariff.
“That is very critical for us in terms of trade value because that is big. We are also competitively disadvantaged vis-à-vis Vietnam,” said Rodolfo.
He explained that Vietnam signed an FTA with South Korea in 2015, which reduced and would eventually set their two-way tariffs for the tropical fruit to zero.
“Within five years, the 30 -percent tariff would be declining until it reaches zero on the fifth year,” Rodolfo said, explaining a possible scenario if the bilateral trade deal between the Philippines and South Korea would be signed in November.
“We are already working with the Department of Foreign Affairs so that we can prepare for the requisite certificate of concurrence with the agencies, and then its submission to the Office of the President,” he added.
The trade official added that the Philippines was also looking at directly supplying South Korea with nickel ore. South Korea is presently importing nickel battery precursor materials from China.
The Philippines supplies more than 60 percent of China’s nickel imports, he said, implying that a direct trade deal between Philippine and South Korea instead will be more beneficial for both parties.
“We can further collaborate because there is a clear synergy,” he said.
Asked for how much potential foreign direct investments the FTA could bring to the Philippines, Rodolfo said estimates placed it at between P150 billion to P200 billion in three years, particularly in the electric vehicle value chain and in agricultural processing.
The electric vehicle segment, including hybrid models, have been slowly but steadily gaining ground in the Philippine market and is seen breaching 2,000-unit sales per year in 2022, which will account for about a 1.68 percent market share.
Its market share in 2021 stood at 0.31 percent (810 units), 0.16 percent (344 units) in 2020, 0.05 percent (187 units) in 2019, 0.03 percent (109 units) in 2018, and 0.02 percent in 2017 (86 units) according to the Chamber of Automotive Manufacturers of the Philippines Inc. and the Truck Manufacturers Association.