FTA Support Services

This section addresses the third question of this paper regarding what can be done to improve FTA use at the firm level. In it we undertake an overview of the FTA support available and the types of services demanded by firms. First, the agencies or institutions in the Philippines that provide FTA support are examined, and it is determined whether or not exporters avail themselves of such services or support. Second, the types of services demanded by firms are identified, and some areas in which there are supply gaps in FTA support services are explored.

6.1 Public and Private Sources

FTA support in the Philippines stems from both public and private entities (see Appendix 7 [ PDF 19.4KB | 2 page ] for details). Public sources include the Department of Trade and Industry (DTI), which is responsible for the implementation and coordination of trade and investment policies, as well as for promoting and facilitating trade and investment through its two bureaus on international trade relations and export trade promotion. Attached to NEDA is the Tariff Commission, which handles all tariff related matters and disputes. The BOC, under the Finance Department, is the sole issuing authority of preferential certificates of origin for use in trade with FTA partners. Private sources include Philexport, which is an umbrella organization for Philippine exporters. It has a trade policy center to inform the private sector of trade policy issues and FTAs, among other information. There is also the Philippine Chamber of Commerce and Industry (PCCI) and various industry associations that advocate for FTAs, offer trade negotiation support, and conduct activities to raise FTA awareness. External consultants (e.g., law and accounting firms) and intermediaries, such as freight forwarders and customs brokers, also provide services for FTA-related needs.

At least 63% of firms identified a government agency as a source of FTA support. Overall, the DTI has been identified as the primary source of assistance. On the other hand, Philexport has been tapped as the lead source of support in the private sector. While the reliance on existing sources of support is strong, exporters are demanding a wide range of services, from information and technology support to financial assistance. Firms have also sought assistance from lawyers, consulting firms, and brokers for their specific FTA requirements.

6.2 Services Demanded and Supply Gaps

Almost 90% of the sample (139 firms) demanded information-based services. Considering that a lack of information is the main impediment to the use of FTAs, it is unsurprising that firms called for more information on FTAs. Specifically, the firms demanded more FTA awareness training (83% of responses), more studies on the impact of FTAs on business (65%), consultation during FTA negotiations (43%), and monitoring and surveillance of NTMs (38%) (see Table 11 [ PDF 19.4KB | 1 page ]).

A lot has been done, both by the government and by private sector entities, to disseminate information and increase industry participation in FTAs involving the Philippines. However, feedback from firms seems to suggest that existing information-related services on FTAs may be inadequate or need improvement in terms of the quality and depth of FTA support made available. Interagency coordination and public-private cooperation is required to identify which information is needed by whom. This will also avoid the duplication of effort and result in a more strategic and fruitful information campaign.

It will also open up some opportunities for lawyers, private consultants, and brokers to extend their services beyond facilitating the processing of export documents, to also conducting feasibility studies for firms to maximize their benefits from FTA preferences.

Supply gaps in much-needed technology-based services. While the demand for information can be met by bolstering the existing services provided, there are explicit shortfalls in meeting the demand for technology upgrades, such as the use of EDIs in ROO systems and the upgrading of technical standards and skills. Technology-based services are sought by about 65% of the total sample (101 firms). What is worrying is that, as shown in Table 11, with the exception of customs, there appears to be no tangible source in either the public or private sectors of any FTA-related technology support available to firms. Furthermore, customs alone may be hard-pressed to fully implement the use of EDIs in export and ROO systems—the implementation of EDIs may require further facilities and services from the private sector. In terms of technical and skills upgrading, SMEs are particularly at risk because they have very little in-house capacity and must rely on outside pools of technical expertise and facilities for information. Providing quality testing laboratory facilities for small firms could address these technology constraints.

SME support and financial and other incentives are also important. 56% of exporters (87 firms) claimed that SME extension services, financial support, and other incentives are needed, with 47% wanting extension services for SMEs and 42% wanting other incentives. SME extension services could improve the export competitiveness of these firms and allow them to realize gains from FTAs. Trade finance and other credit programs for collateral-constrained SMEs are particularly needed for firms to adjust to the effects of the global economic crisis.

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