TRADE and Industry officials see the free-trade agreement (FTA) between the Philippines and South Korea as an “important pillar” in terms of positioning the Philippines as the regional hub for “smart” and sustainable manufacturing and services as the world’s 13th-largest economy is a good source for technology.
The chief negotiator for the agreement, Trade Undersecretary for Industry Development and Trade Policy Group (IDTPG) Ceferino S. Rodolfo, said the FTA is expected to generate investments particularly in future-oriented industries in the country, like electric vehicles (EVs).
The trade official explained it was “future-oriented” at the time the negotiations for the FTA began, which was in 2019.
“At that time, future-oriented pa ang electric vehicles; pero ngayon, nandiyan na talaga si EVs,” Rodolfo said at a news briefing last Friday. [But now, EVs are really here.]
“By way of securing investments from Korean companies for future-oriented industries initiated through technical cooperation between our governments,” the DTI executive added.
Rodolfo explained that Chapter 7 of the FTA (“Economic and Technical Cooperation” chapter) states that “the parties, on the basis of mutual benefits, shall explore and undertake cooperative activities focusing on the following areas: industrial development including health and life sciences-related manufacturing and cooperation on processing of technology metals.”
Drawing from this chapter in the trade agreement, he said the Philippines is currently negotiating, through a Memorandum of Understanding (MOU), an agreement on processing of critical minerals.
“There are two countries that are really very good when it comes to EV batteries,” Rodolfo said citing China at the top, followed by South Korea. Nonetheless, he said these countries source their minerals from the Philippines.
“That’s why we want to focus on processing (of minerals), not just merely exporting it to China, and then China exports battery precursor materials to Korea.”
Meanwhile, in anticipation of the signing of the FTA with South Korea in late 2022, Rodolfo said the DTI launched “intensive” promotional campaigns for investments.
Last December, a delegation from Central Luzon proposed South Korean investors to consider Region 3, including New Clark City, as an ideal investment destination.
The delegation was joined by representatives from the Department of Trade and Industry (DTI), the Bases Conversion and Development Authority (BCDA), the Authority of the Freeport of Bataan and the local government units of Aurora, Bataan, Tarlac and Zambales.
During the trade mission, Tarlac Governor Susan A. Yap pitched to South Korean firms the region’s “centrality of location.”
According to Yap, Region 3 is “easily accessible within 2-hour to 4-hour air travel from Korea.”
“It’s on its way to becoming a single, contiguous geographic and economic growth corridor providing world-class logistics, infrastructure and services,” the official added noting that the region has several freeport zones.
Rodolfo explained that while the Calabarzon region was developed mainly by the Japanese, Central Luzon is being positioned more for Koreans.
Last Thursday, President Ferdinand R. Marcos, Jr. reported the signing of the much-awaited Philippine-Republic of Korea (PH-KR) FTA during the sidelines of the 43rd Association of Southeast Asian Nation (Asean) Summit in Indonesia.
“The FTA will strengthen our bilateral trade and investment relations with the Republic of Korea, especially as it generates jobs and contributes to the Philippine value proposition as an ideal regional hub for smart, sustainable investment,” Marcos said.
For agricultural goods, Rodolfo said the Philippines was able to secure tariff elimination for 1,532 lines, of which 1,417 lines are for tariff elimination upon entry into force (EIF) of the Agreement.
Under the PH-KR FTA, the Philippines was able to secure tariff elimination in five years for bananas, elimination in seven years for processed pineapples and elimination at EIF for the said remaining lines.
Meanwhile, for industrial goods, the Philippines was able to secure tariff elimination for a total of 9,909 lines of which 9,747 lines are for tariff elimination upon EIF of the Agreement.
According to the Department of Trade and Industry, South Korea is the fifth-largest trading partner of the Philippines.
In terms of exports, South Korea is the Philippines’s 8th-export market, with exports to the said country valued at $2.57 billion. On the other hand, South Korea ranks third as the Philippines’s import supplier, with imports valued at $9.35 billion.