The Philippines stands a chance for possible renegotiation in its commitments, particularly the services sector, Regional Comprehensive Economic Partnership (RCEP) following the enactment of three critical economic laws that opened up to 100 percent foreign ownership in previously restricted sectors in the domestic economy.
Ramonette Serafica, senior research fellow at the state-run Philippine Institute for Development Studies, raised this possibility at the virtual panel discussion on “RCEP: Should we get in now?” hosted by the Management Association of the Philippines as government has renewed its campaign for Senate concurrence to the Malacanang ratification of the mega trade deal. RCEP already took effect in January this year for countries that have already ratified the treaty.
“I think it's worth noting that the current commitments are based on the pre liberalization policies. So this is before the amendments to the Philippine Services Act and the Retail Trade Liberalization and so, which means our commitments are quite conservative,” said Serafica.
She, thus said that if the Philippines will join RCEP later, the country will have to renegotiate its commitments and it is likely that “we will be asked to bind the more liberal regime.”
In addition, Arthur Tan, CEO of IMI Inc., an Ayala-owned global electronics manufacturing firm, stressed that while he is in favor of the Philippines ratifying the RCEP agreement, he also urged for the implementation of strong strategy.
“Is RCEP important and should we be part of it? My answer is yes. But I don't think we should be part of it, just to be able to play, but we should have a very strong strategy of how we're going to lead in that market,” said Tan at the same MAP forum Thursday, March 24.
Furthermore, Serafica also cited the need for developing countries participating in RCEP to conduct a thorough review of trade related regulations to define which sectors can compete and not be included in the deal noting that legally binding market access and non-discriminatory treatment have positive impacts on trade and further reduction in uncertainty will lead to more trade..
In particular, Serafica cited the country’s services sector. To further maximize the benefits, Serafica said “We will need to effectively implement the agreement which requires further work and transitioning services to the negative list and improving the regulatory environment.”
The Philippines commands a higher share at 40 percent mark in services in total trade globally. In 2020, the Philippines share of services on total global trade was 39.83 percent and 43.54 percent in 2019.
In terms of export capacities, she said, the Philippines is already competitive in certain sectors with comparative advantage in goods and services and in digitally delivered services, specifically computer services and technical trade related and other business services.
“So, we are in a position to exploit the opportunity from the growth of services outsourcing,” she said citing experts indicating a new wave of globalization, which was aided by digitalization.
In addition, the small and medium enterprises will be able to take advantage and participate globally.
PIDS also released a position by Doris Magsaysay Ho, Philippine Services Coalition Co-chair and A. Magsaysay, Inc. who also served as a discussant in a webinar recently organized by the think tank bolstering its position.
Ho has urged the development of key areas in Philippine services sector to succeed in trade negotiations.
“What we are missing are the big audacious ideas of what products and services we are selling, which is the fundamental reason why economies jump into free trade agreements,” Ho pointed out.
She also emphasized the need to have a strategic approach in identifying and promoting the products and services that the country aims to excel in. This includes involving the government, private, and civil society sectors.
“This approach would address the weaknesses identified in the paper—the lack of branding and infrastructure to have the scale and sustainability to make us truly competitive. This effort would also give a clear answer when investors ask what drives your economy,” Ho explained.
She said the Philippines can learn from other countries “that have very clear unique propositions for the products and services they are selling”. For instance, Ho cited South Korea’s “all-of-economy” approach to their booming entertainment industry.
“The quality of their production reflects the involvement of many agencies that are responsible for tax incentives for cultural promotion, food promotion, education...Everyone is involved in creating South Korea's creative proposition,” Ho explained.
For the Philippines, Ho identified the services sector industries that the country can further develop, such as business process outsourcing, maritime, construction, healthcare, and creative industries.
“Once there are clear goals about what it is we are trying to achieve in each of these sectors, there would be an understanding of what cross-cutting policies and laws are needed,” Ho said.
In the construction industry, for instance, she said that instead of negotiating for the entry of Filipino workers to other countries, the Philippines could have locally based construction companies with or without foreign partners. This will enable the industry to provide construction services and build well-trained construction teams that can compete abroad.
Finally, Ho noted that having these strategic goals will guide the country’s negotiators in setting the terms, conditions, and commitments that will enable the services sector's entry into new markets.