Increasing Relevance & Encouraging Utilisation of FTAs by SMEs

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  • 1. Increasing Relevance & Encouraging Utilisation of FTAs by SMEs 9 June 2011Agenda Free Trade Agreement and Relevance to Business Current Utilisation of FTAs in Philippines Challenges to Optimising Usage of FTAs Key Benefits Accrued FTA Usage Optimising FTA for SMEs barterfli : Increasing Relevance and Usage of FTAs
  • 2. FTA and Relevance to BusinessWhat is Free Trade Agreement? An agreement signed bilaterally or multilaterally in which signatory countries agree to: • bring down trade barriers • reduce tax for products moving between affected countries • encourage trade, business cooperation and investment A system of certifying the origin of the products flowing between the signatory countries, is central in how FTAs, bring down import/export tax. Rules of Origin (ROO)
  • 3. 1. Global Expansion of FTAs !"#$% &#()*+ ,-.- /(+%0 1+20* 342+* 5"0*+ 617 899*#$:* 617; ,<< =(+* #42" >-? Source: WTO (Source: WTO) FTAs in Asia (Source: ADB) FTAs in ASIA Concluded: 7 7(1991) • Concluded: (1991) 45 (2000) 45 (2000) (2010.07) (2010) 115 115 • Negotiations in process: 63 Another 63 in negotiation Source: ADB Over 280 FTAs signed internationally Billion dollars of potential tariff savings Encourages trading activities and use of trade services such as logistics Helps SMEs to become more competitive 2. Major Countries’ FTAsFTAs Signed by the World 2. Major Countries’ FTAs No. FTAs Signed No. Signatory Partners !
  • 4. Current Utilisation of FTA by PhilippinesFTAs Signed by Philippines Status Regional Bilateral ASEAN (1993) ASEAN-PRC (2005)In effect ASEAN-Korea (2006) Japan-Philippine EPA (2008) ASEAN-Japan CEPA (2008)Source ADB, January 2010 "
  • 5. FTAs Signed by Philippines Status Regional Bilateral ASEAN (1993) ASEAN-PRC (2005)In effect ASEAN-Korea (2006) Japan-Philippine EPA (2008) ASEAN-Japan CEPA (2008) ASEAN-Australia-New Zealand CER (2009)Signed ASEAN-India FTA (2009)Source ADB, January 2010 "FTAs Signed by Philippines Status Regional Bilateral ASEAN (1993) ASEAN-PRC (2005)In effect ASEAN-Korea (2006) Japan-Philippine EPA (2008) ASEAN-Japan CEPA (2008) ASEAN-Australia-New Zealand CER (2009)Signed ASEAN-India FTA (2009) ASEAN-EU FTAProposed ASEAN+3 FTA (Japan, PRC & Korea) ASEAN + 6 FTA (Japan, PRC, Korea, India, US-Philippines FTA (TIFA Australia and New Zealand)Source ADB, January 2010 "
  • 6. Pattern of FTA Usage Current Country Factors Utilisation Japan 29% •global operations •dense network of private sector Thailand 25% •growth of manufacturing sector especially automotive • strong emphasis on FTAs as a trade policy tool Korea 21% •relative late in the FTA circuit Philippines 20% •predominantly reliant on AFTA • export activities slow down since last financial crisis Singapore 17% •relatively low tax •usage of other business incentivesUsage of AFTA !"#$% 0.4 0.3 0.2 &"#% &&#"% 0.1 Transport Food 0 Electronics #$
  • 7. Impact of FTA on CostProduct: • !"#$%$&()*+,+-./012&13456&.78.9+8&087.80&+:&;<##=$###>>? Export from Philippine to Malaysia @4A&B4*0&H0:+50&(E@( @4A&B4*0&C.*D&(E@( %<G %F<G 22.5% ## Impact of FTA on CostProduct: • ;"#$;#&I480&J+/41101?&& Export from Philippine to Thailand @4A&B4*0&H0:+50&(E@( @4A&B4*0&C.*D&(E@( $#G <G 25% #%
  • 8. Philippines Export Performance ASEAN FTA #& Challenges to Optimising Usage of FTAs
  • 9. Challenges to Optimising FTAs Varying and Confusing FTA Modalities Spaghetti bowl syndrome Cost of FTA Compliance & Registration Lack of Information and Understanding of FTA’s Business Impact Business DisincentiveChallenges to Optimising FTAs Varying and Confusing FTA Modalities
  • 10. Challenges to Optimising FTAs Spaghetti bowl syndrome • Too many FTAs that are not rationalised • 1 product can come under different tariff rates and Rules of Origins depending on the FTAs • Consideration on whether there is product specific treatment, quota imposition, exclusion list......Challenges to Optimising FTAs Cost of FTA Compliance & Registration • Compliance to FTA through Regional Value Calculation (RVC), exposes company to fluctuation of production cost, materials and forex exchange movements • Compliance typically involved hired 3rd party services • Registration can be costly in terms of time, money, resource • Human resource intensive to register, manage, monitor and maintain • Manually tedious
  • 11. Challenges to Optimising FTAs Lack of Information and Understanding of FTA’s Business Impact • Especially smaller companies are not aware of what and how to use FTA • Few documented case-studies to show real business impact of FTA on top/bottom lines • Limited access to advisory support to guide use of FTAsChallenges to Optimising FTAs Business Disincentive • Cost of registering for FTA does not justify the profit margin/advantage created • Other attractive investment/business incentives • No perceived linkage to real business leads/ opportunities • Concerns over releasing confidential business and
  • 12. Challenges to Optimising FTAs TextSource: Masahiro Kawai and Ganeshan Wignaraja, ADBI Working Paper Series, The Asian “Noodle Bowl”: Is It Serious for Business?, No. 136, April 2009 Key Benefits Accrued to FTA Usage
  • 13. Key Benefits Accrued to FTA Usage Market Access Lower production cost New Business Opportunities Encourage Foreign Direct InvestmentKey Benefits Accrued to FTA Usage Market Access Lower production cost New Business Opportunities Encourage Foreign Direct InvestmentBenefits Still Outweigh the Impediments
  • 14. Expected Pattern of Usage Current Country Factors Utilisation Japan 29% •global operations •dense network of private sector Thailand 25% •growth of manufacturing sector especially automotive • strong emphasis on FTAs as a trade policy tool Korea 21% •relative late in the FTA circuit Philippines 20% •predominantly reliant on AFTA • export activities slow down since last financial crisis Singapore 17% •relatively low tax •usage of other business incentivesExpected Pattern of Usage Planned Current Country Future Utilisation Utilisation Japan 29% 47% Thailand 25% 46% Korea 21% 54% Philippines 20% 41% Singapore 17% 28%
  • 15. Optimising FTAs for SMEsOptimising FTA for SMEs !"#$%&($") Increase FTA !"#$%&&()* Usage !"#$%&() +,-&./0&%* Amongst SMEs !"#$%&## ())*+,"%$-&#
  • 16. Optimising FTA for SMEs !"#$%&()**++(,#(-#"("./0)"(123(,")%4%4.(5"#.")--+( */+,#-%+&(,#(678+ !"#$%&($") 905(678+(/4&"+,)4&((:#;(,:%"(5"#&/*,+(*)4(5#,4<)0( =/)0%>?(>#"(123 @%++-%4),(/5&),(#4(4;(&$0#5-4,+(#4(,:($)"%#/+( 123+(,:),(,:%"(5"#&/*,+()"(*#$"&(/4&" Increase FTA (!"#$%&(*)+(+,/&%+(#>(:#;(#,:"(*#-5)4%+(:)$(/+&( 123+ Usage Amongst SMEs A/)4<,?(B/+%4++($)0/(*"),&(B?(123 (((Optimising FTA for SMEs
  • 17. Optimising FTA for SMEs !"#$%&&()* +,-&./0&%* !"#$$%&!"()*!%!+#%,+-!-./%#*!$&%0-**-*!/12%32-.!/1! +$$3/0+4%1!%5!2+&/%#*!678!&-3+-.!.%0#,-1+4%1 Increase FTA Usage !!! Amongst SMEsOptimising FTA for SMEs !"#$%&## !"#$%!&(!)*!+,-./01!%!)2!0-&/!3)4&!567!8&(! ())*+,"%$-&# -&.98%(!3,%-&%%!*::*9),&-;%!8&(!3<9!3*<*=!0-&% >98)!3,%-&%%!=8).2-&?!8.;@-;%!)*!:9*=*)!567! .*=:0-8&)!.*=:8&-% "2*4!.8%!%,..%%!%)*9-% Increase FTA #8%,9!)2!A.8.1!*B!)2!3,%-&%%!(80%!%;=,08)(!31! Usage 567!,%8? Amongst SMEs !!!
  • 18. Optimising FTA for SMEs !"#$%&() !"#$%&$!$%($#!%))$!&*!+,-!%./(*#0!122*#&!3*45(4$!%4.! *6(4$7 8#(49!.*:4!&;$!)*&!&*!1$!+,-!%./(*#0!#$*1#)$ !,%#9$<$.!%./(*#0!122*#&!=#*>!#$5$/%4&!%9$4)($!&*! ;$52!)*>2%4($!)*>250!:(&;!+,-!#$?1(#$>$4& Increase FTA Usage !@%&;$#!(421&!=#*>!ABC!*4!2#$!%4.!2*&!+,-! 4$9*D%D*4!%4.!(>25$>$4&%D*4 Amongst SMEs !!! barterfli: Increasing Relevance and Usage of FTAs
  • 19. A Comprehensive E-Trading Ecosystem Platform that provides holistic and practical e- commerce solutions that: Lower Increase Growbarterfli Addressing the E-Commerce Gaps Value Centred SME Trade Online Fraud Around Challenges Concerns Listing Remain opportunities Unaddressed Restricted Global Trade Services to Resources Support Underutilised Strategic Procurement Planning
  • 20. barterfli Addressing the E-Commerce Gaps Value Centred SME Trade Online Fraud Empowering Providing Challenges Business Around Concerns SMEs Holistic Remain Community Listing E- Through Business Unaddressed Authentication opportunities Marketing Support Restricted Global Trade Providing Services to Unlocking Buyers with Support Resources Strategic Power of Underutilised Strategic Procurement Procurement Global FTAs Tools e.g Tariff Planning Database Complete !"#$%&($") Business Cycle E-hunt for viable business leads !"#$%&() Active E- FTA MarketingOptimisation !"#$%&&()* +,-&./0&%* Transaction/ Fulfillment !"#$%&## Business Re- ())*+,"%$-&# engagement
  • 21. E-hunt for viable !"#$%&&()* !"#$%&## !"#$%&() ())*+,"%$-&# business leads !"#$%&($") +,-&./0&%* alerts you on whether your product is covered by FTA identifies the tariff savings that you can benefit from guides you on how to meet Rules of Origin (ROO) timely alerts on any new development on relevant FTAs timely alerts on any new development on relevant FTAs Active E- !"#$%&&()* !"#$%&## !"#$%&() ())*+,"%$-&# Marketing !"#$%&($") +,-&./0&%* Companies with relevant Preferential Certificate of Origin (PCO) will be profiled to potential buyers online Companies with PCO will participate in selected business matching activities organised jointly by barterfli and PhilExport
  • 22. 1. World’s First Tariff & FTA Database Providing Buyers with Allows buyers to access 10-Year Tariff and FTA Schedule to support Strategic cost-effective production and raw material procurement planning ProcurementTools e.g Tariff Database Allows companies to assess most attractive export market destinations Allows companies to identify FTA compliant suppliers that can bring down cost For more information on email: info@barterfli.com