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The ratification of the Regional Comprehensive Economic Partnership (RCEP) will help the Philippines further attract foreign direct investments, a Trade official said.
“Besides the huge domestic market of 110 million people, the Philippines offers access to the Asean market that has more than 600 million population, and to other key markets through our free trade agreements (FTAs) and generalized system of preference (GSP) with other countries and regions,” Trade Secretary Ramon Lopez said.
RCEP, which includes 10 Southeast Asian economies along with China, Japan, South Korea, New Zealand and Australia, is the world’s largest trade pact in terms of gross domestic product (GDP).
First proposed in 2012, the deal was finally sealed at the end of a Southeast Asian summit on November 15.
Lopez said the RCEP further solidifies the economic partnership of Asean with its regional partners.
“For the Philippines, more specifically, RCEP presents an enhanced platform for attracting investments in export-oriented manufacturing,” he said.
According to Lopez, RCEP accounts for almost a third of global 2019 GDP.
“With a combined GDP of $25.8 trillion, the said trade bloc is bigger than the United States-Mexico-Canada Agreement and the European Economic Area, which comprises of the EU27, Norway, Iceland, Liechtenstein and, during the transition phase, the United Kingdom,” said Lopez. EU is the European Union.
“It may be noted that RCEP’s importance is not only due to market integration. Of great significance is the further integration of its members’ production networks by allowing greater cumulation of rules of origin, presenting harmonized rules and procedures that facilitate trade, and covering areas such as services and intellectual property,” he added.
Lopez said the signing of RCEP, per the recent Investment Trends Monitor of the United Nations Conference on Trade and Development could help renew foreign direct investment growth.
Laws needed to boost investment
Aside from RCEP, Lopez said the full implementation of the Corporate Recovery and Tax Incentives for Enterprises (Create) Act and the passage of the remaining economic reform bills will also help attract investments.
“Create which is definitely a milestone and a new landmark incentive law. It provides the government the flexibility in granting fiscal and non-fiscal investments for high-value strategic investments. A responsive SIPP (Strategic Investment Priorities Plan) is currently being crafted that will support the country’s fast recovery,” said Lopez.
“Other government support and proposed legislative reforms that aim to ease investment restrictions such as the Public Service Act, Retail Trade Liberalization Act (RTLA), and Foreign Investments Act are also expected to contribute to the acceleration of the country’s growth. It may be further noted that these reforms are targeted to be approved by October 2021,” he added.
The RTLA amendment seeks to lower the paid-up capital for foreign retail enterprises from the current P120 million ($2.5 million) to P50 million while amendments to the PSA propose that public utilities be described and distinguished from public services. Public utilities can only have “natural monopolies” in the distribution and transmission of power, water and sewerage while the bill that seeks to amend the Foreign Investments Act eases rules on foreign businesses.