Domestic home appliance makers have asked the government to exclude 13 locally manufactured items including karaoke, refrigerators and flat iron, from among the electronics products whose tariffs will be eliminated by 2007 under the accelerated ASEAN sectoral integration.
In a letter to Trade and Industry Secretary Peter B. Favila, the Philippine Appliance Industry Association Inc. (PAIAI) identified these products as karaokes, colored TV, refrigerators, upright freezers, washing machines, window air-conditioner, split type air-conditioners, packaged air-conditioners, electric fans, flat irons, oven toasters, stoves and ranges.
"We request that these appliance products should not be included among the electronics products for integration and subsequent tariff elimination by the year 2007," said PAIAI president Fernanditas T. Malit and chairman Raul Joseph A. Concepcion.
The local manufacturers have requested that the 13 items be placed under the negative list in the ASEAN Priority Integration Program.
Ironically, the Philippines is the chairman of the electronics sector in ASEAN. There are 11 priority areas for economic integration in the region and the Philippines chose electronics because of its competitive edge in this sector.
Under the ASEAN Sectoral Agreement for Electronics, tariffs for electronics products must be eliminated by 2007 for the ASEAN 6 and by the year 2012 for the CLMV (Cambodia, Laos, Myanmar and Vietnam).
But the local players stressed the 13 products are locally manufactured and eliminating their tariff by the year 2007 will have a negative impact on the operation of the local manufacturers and would run contrary to the main objective of ASEAN Economic Integration which is to promote equitable economic development and reduced poverty and socio-economic disparities.
PAIAI said that tariff reduction over the last five years also led to the closure of nine factories and displaced 4,000 employes. The surviving 13 factories whose existence is threatened by the impending regional industry integration may just convert as mere traders as imported products would become very cheap with tariffs going down to zero.
This would mean losing an estimated 8,000 jobs if the 13 items are not placed under the Philippine sensitive list as the closure of factories will also impact on the operation of 35 local suppliers of raw materials parts and components.
Another factor is the declining domestic demand for electronics and electrical appliance products as consumers are scrimping as the current economic and political situation have dampened the demand for household durables.
Compared to 2004, the January-August demand for colored TV dropped by a negative 2 percent, refrigerator by a negative 11 percent, window air conditioner by a negative 9 percent and washing machine by a negative 27 percent.
Electronics and electrical appliance products are very different from the semiconductor operations, which inputs are all tax and duty-free while the home appliance makers payu more than 50 percent of their raw material cost.
Semiconductor firms are shielded because they are for the exports market while the appliance sector catered to the domestic end-consumers.
While there are local electrical and home appliance makers are able to penetrate the global market, they have yet to achieve an export volume that will support the opening of the local markets to other markets.
The local industry also pointed out that while the Philippines lagged behind other ASEAN countries in the exports of home and electrical appliances, most ASEAN countries include electronics and electrical appliance products in the latest ASEAN Priority Integration’s Negative List.
Thailand has 235 in the Negative List, Brunei with 335, Cambodia with 2293, Myanmar with 82, Malaysia with 45, Indonesia with 52, Vietnam with 11 and Myanmar with 82.
On the other hand, the Philippines, with its weaker position, included only two tariff lines in the Negative List but those are not in the home appliance but for automotive electronics.
"This we cannot understand. Why are we so eager to eliminate tariff on products that we are manufacturing locally and selling to the domestic market," the PAIAI letter to Favila said.
Even the country’s most-favored nation tariff for appliance products is already at 10 to 15 percent range but other ASEAN countries are in the range of 20 percent to 30 percent.
"We don’t want to think that the government is already giving up on the manufacturing of electronics and electrical appliance products in the country, but that seems to be the signal that we are getting. As to how this will help the government’s economic program, we are utterly clueless," PAIAI said.(BCM)
