Reforms, including improving logistics, needed for full integration of PH into global value chain

0
487

ID-100329906The Philippines stands to gain much from becoming a more active player in the global value chain (GVC)—but only after it solves major hindrances such as poor infrastructure and logistics services and inefficient customs administration, according to the latest report of the Philippine Institute for Development Studies (PIDS).

The government think tank in its “Building Inclusive Economies, Building a Better World (A Look at the APEC 2015 Priority Areas) Volume 1” report said the country “has both the natural and human resources to join the GVC,” which it mglobal ust attempt in order to “help propel growth and improve its standard of living.”

Value chains involve the full range of activities that firms and workers perform to bring a product from conception to its end use and beyond. GVCs, hence, refer to value chains that have generally been carried out in interfirm networks on a global scale.

GVCs exist not only in the goods sectors but also in the services sector, which includes transportation.

PIDS noted that GVCs increasingly dominate world trade and by focusing on them, “the Philippines as the Asia-Pacific Economic Cooperation (APEC) host economy in 2015 can contribute to regional integration and advance its economic interest in services.”

It said, “APEC 2015 is an opportunity for the Philippines to develop its GVC strategies, particularly in relation to services value chains.”

(The services sector was in fact a focus area at the recently concluded APEC summit.)

PIDS said that with the Philippines’ advantage in other business services and in computer and information services, advancing regional cooperation in services value chains could further strengthen the country’s export position in these areas. In the country, as well as in many other Asia-Pacific countries, electrical and optical equipment is the most important GVC.

PIDS noted that several factors prevent the Philippines from integrating into GVC completely. These include supply chain barriers such as low availability and quality of infrastructure and infrastructure services, poor logistics services, inefficient customs administration, inefficient import-export procedures, inadequate regulatory environment, and weak physical security. Structural obstacles, on the other hand, include poor quality and high cost of energy, insufficient technological capabilities, and lack of supplier industries.

The study said instituting reforms is the key to the country’s improved participation in global trade.

“These reforms should aim to make goods travel faster within and outside of the Philippines and to make it easier for firms, both foreign and domestic, to do business in the country. With the right policies, the Philippines will be well positioned to move up the GVC,” PIDS said.

10 ways to close the gap

The think tank recommends 10 steps that the Philippines can undertake as chair of the 2015 APEC summit to achieve better GVCs. These include encouraging regional cooperation in establishing the policy environment for new regional infrastructure projects, and building the capacity of local logistics providers and small and medium enterprises by facilitating their linkup with multinational logistics corporations.

The study also recommends supporting the APEC Principles of Transborder Logistics Services Optimization by simplifying and harmonizing trade and transportation procedures, improving understanding of new technologies, and optimizing trans-border logistics. The latter includes the Authorized Economic Operator, single window, time release survey, secure and smart container, electronic certificate of origin, supply chain visibility, intelligent transportation system, and global navigation satellite system, PIDS noted.

There is also “a need to address the impediments related to customs issues of the APEC Cross-Border Customs-Transit Arrangements, such as varying customs documentation standards, lack of adequate IT infrastructure and interoperable data-sharing system, multiple financial guarantees, arbitrary administrative fees, and delays at customs offices,” it added.

PIDS likewise suggests undertaking Philippine case studies to verify the duration, costs, and number of documentation and how these affect export and import facilitation.

Another recommendation: Encourage member-economies to engage more with stakeholders in identifying and solving specific chokepoints, and designing targeted capacity-building activities with measurable goals. PIDS also called for developing policy guidelines or best-practice guidelines for each chokepoint for member-economies to use as reference.

Moreover, the study suggests enhancing the physical infrastructure of member-economies through funding of key projects (e.g., APEC to coordinate with the Asian Development Bank in prioritizing projects). It also proposes that the APEC Policy Support Unit establish the minimum number of indicators for measuring the progress of compliance to the suggestions.

Lastly, PIDS urges the Philippines to take the lead in setting higher de minimis values (e.g., above US$100) to encourage other APEC economies to agree to exempt express and postal shipments from customs duties or taxes, and from certain documentation requirements for shipments above US$100 in value. Under the proposed Customs Modernization and Tariff Act of the Philippines, the proposed de minimis value is P5,000. The current value is P10. – Roumina Pablo

Image courtesy of khunaspix at FreeDigitalPhotos.net