Socioeconomic Planning Secretary Karl Kendrick Chua
Senate Briefing on the Regional Comprehensive Economic Partnership Agreement (RCEP)
MAY 30, 2022
Good morning, Senator Win, Secretary Mon, my colleagues and friends in the Senate and the Executive, and everyone viewing us today to understand better what this RCEP is.
First of all, I’m grateful for the opportunity to meet all of you in person again for this briefing. We have not had the chance to meet face-to-face in the past two years, and I think this is a good opportunity to catch up again and talk about some very important policy issues. As many of you know, before the pandemic I was in the Department of Finance and we had these types of engagements, so that we may explain to you all the reforms that we have been proposing including the several series of the tax reform. And, you know, tax reform is like all other reforms – a trade-off. There are many things that we have to consider, and we presented to you before the cost and benefit of all these reforms. And in the number of presentations I did before the Senate, doing door-to-door to your offices, I think we have explained very well. That is why in the end, the Senate, Congress has voted to pass these tax reforms. At the start, there is always going to be the fear of the unknown or the uncertainty, so I hope we can begin this, we commence this process of reaching out to each other and explaining very difficult concepts like the RCEP. Parang COVID din at the start. We feared it, we didn’t know what to do with it, but as we understand it better, we can manage our lives and move on. Like the tax reform, RCEP is also one of these reforms.
In 1978, the year I was born, the population of the Philippines was 46 million. Today, it is around 110 million, but our land area is not going to change. It is still 300,000 square kilometers. And every year we are converting some of the land into urban dwelling, because that is really the trend globally. As we urbanize, more people need space to live closer to the cities. But that does not mean we sacrifice the sector that is most important to our health and our structural transformation–that is the agriculture sector. And our message today is not that we do not help the agriculture sector. Let it be extremely clear that we will help the agriculture sector be competitive and be productive because that is the foundation of our structural transformation to become a prosperous country. But not at the expense of all the other sectors that also need our support. So, what we propose, like Secretary Mon said, is to do things in parallel: ratify the RCEP but also help the agriculture sector become more competitive. In the tax reform, we did it also in parallel: we broadened the tax base but we institutionalized an unconditional cash transfer (UCT) to help the poorest 50.0 percent. In the Rice Tariffication Law (RTL), we did not do it step-by-step or sequential, we did it in parallel: we opened the rice market so that we can feed the other 110 million Filipinos reliant on rice every day, but at the same time, supported the farmers.
Last year, I understand, PhP 17 billion from all the tariff collection is given to the rice farmers. So in other words, if we did not have the RTL, or the Rice Tariffication Law, with the tariff rates that we used to collect tariff revenues, we will not be able to provide more support to the agriculture sector. The Rice Tariffication Law also led to increases in yield from around three metric tons per hectare to around four metric tons per hectare. And our goal is to continuously improve this. Despite the concerns that were raised during the hearings, we continue to increase the total production of rice. Last year, it was almost 20 million metric tons yet we also imported in a temporary manner, to fill in the gap because as I mentioned the population continues to grow, but our land area is not going to grow. So in other words, we have to look at this RCEP in parallel with all the support that we should give to the agriculture sector. And I emphasize agriculture because I think that is one of the remaining issues that need to be enlightened. As Director Bien will explain later, joining RCEP actually will preserve 98.1 percent of all tariff lines. We’re not touching them. We are only touching 15 agricultural commodities, representing 33 tariff lines that will see lower tariff rates, but many of these are not sensitive products. And they only account for USD132 million import or 1.9 percent of the total agricultural import. But if we just focus on the sector, and the concerns of the sector, without listening to the bigger concerns of the rest of the country, I think we will miss out a golden opportunity. Space X and Tesla are now talking to different countries. They are in Indonesia and Malaysia. They’re also trying to talk to the Philippines, but in the end, it’s about all these seamless transactions that will bring these very large investments into the Philippines. We passed CREATE, we passed three liberalization laws. But without RCEP, we are just fooling ourselves. We want to attract investors, but we don’t want to make it easier for the investors to come in and invest in the Philippines. That is why I think we have to look at this golden opportunity.
Let me end with an analogy, I will not spend too much time. But you know, we are not competitive in many sports, yet since the start we always joined the Olympics. And we always lose over the years, and it was only in recent times that we start to gain medals. Did we say in the past, “Let’s not join the Olympics because we are not competitive”? Actually, the most potent way to improve our skill is to join these international events so that we learn, we are not narrow-minded and protectionist in mindframe. We enter the Olympics, we know we will lose maybe, but we will try our best because we will see how good our competitors are. And over the years, we will improve, and we will get the budget and the support needed from the home to get one or two more medals every Olympic year. So I hope this will be our mindset. First, the main message, we will support Agriculture in parallel with passing the RCEP because of such golden opportunity, but we will miss out, forever, if we did not join. This is the biggest trade agreement today surpassing other agreements, other entities like the EU. And second, we want to learn and be more competitive, and the best way is not to be protectionist or inward-looking. It is to get into the global arena, compete and learn what the other countries are doing, and improve ourselves further.
So let me stop here, thank you very much.