EU Global Strategy

Speech by Mr. Rafael De Bustamante, First Counsellor of the EU Delegation to the Philippines at the EU-PH Business Summit

Brussels, 31/10/2020 - 05:31, UNIQUE ID: 201031_1
Remarks

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EU Delegation Keynote Message

•  Honorable Trade Secretary Ramon Lopez, [Placeholder for other government officials]

•  Your Excellencies and members of the diplomatic corps

•  Mr Nabil Francis, President of the ECCP,

•  Mr Florian Gottein, Executive Director of the ECCP

• Business chambers and industry representatives, academe, colleagues, ladies and gentlemen

Good afternoon!

I would like to commend and congratulate the European Chamber of Commerce of the Philippines for this year's European-Philippine Business Summit. Your efforts and collaboration with the European national business chambers brought us all together virtually amidst the pandemic that forces us to be apart physically.

As an effect of the new normal, we are all witnessing huge changes in the way we do things and in the manner businesses are conducted.

Prior to this health crisis that we all face, the EU economy was growing on solid grounds. All EU member states were seeing their economies expand and the continental economy was set to expand at a steady pace, supporting further job creation. In 2020 we were faced with a global health and economic crisis, which has been  particularly acute during the second quarter of the year and which, according to recent estimates, should contract the EU GDP in 2020 by about 8%.

 

 

To address these challenges, on 21 July – after long days and nights of negotiations –  EU leaders agreed on a recovery plan for Europe (Next Generation EU) as well as on the EU long-term budget 2021-2027. More than 50% of the EU budget – a total of some €1.8 trillion – will support modern policies and will set Europe on a path to a sustainable and resilient recovery. For Commission President Von Der Leyen, with Next Generation EU, “Europe has a once in a lifetime opportunity to make change happen by design to enable Europe to become green, digital and more resilient”. 

As all countries worldwide, the EU faces enormous economic challenges, and societal defies of an unprecedented complexity.  Understandably, the focus now is to temper the spread of the virus and its impact to lives and the economy. However, there are also other challenges that continue to linger, including  simmering trade wars and rising protectionism, which may have a heavy toll on future growth and create uncertainties in long established political relations. This includes Brexit. While there are still considerable uncertainties on the conclusion of this long and painful process, the EU is compelled to work hard to make its economy even more resilient through many useful and necessary economic and financial reforms.

Similarly, the Philippines show-cased a robust and long-lasting growth story with an impressive growth in the last decade and averaging around 6% growth in the last 5 years. The government was head on in tackling important reforms in the areas of taxation, infrastructure, foreign investments and social services, which have resulted to reduction in unemployment and poverty incidence in the pre-COVID period. The country’s sound economic fundamentals and improved credit ratings were helpful in providing cushion as the impact of the health and economic crises hit the region.

 

However, the current situation resulted to serious dents in unemployment and poverty incidence in urban and rural areas alike. In Southeast Asia, we have seen that the Philippines is one of the most negatively hit by the COVID-19 pandemic in terms of economic growth with GDP of growth contraction of 16% in the second quarter of 2020. In the same period, Vietnam managed to even grow by 0.4% while Indonesia and Singapore recorded contractions of 5.3% and 12.6% respectively. The Philippines Central Bank has estimated a GDP drop at year end between 6 and 8%.

At the moment, we see that the Philippines is slowly opening up the economy, also thanks to the emergency relief measures of 165.5 billion pesos (US$3.4 billion) adopted last September to expand healthcare and help businesses.

While this is an important step in the right direction, the business community in the Philippines expects also more long-due reforms affecting the country’s competitiveness and ease of doing business. This has been very evident during the extreme restrictions imposed to fight the COVID-19 transmission in the country. Many companies including the European businesses present in the country have experienced various challenges and issues as reflected in the EU funded study on the impact of Covid-19 on EU business in the Philippines published by the ECCP in August 2020. Let me here recall – among other things - that the cancellation of all working visas for incoming foreign professionals has seriously affected the operation of many EU companies in the Philippines and we do hope that a significant relaxation of such rules can be implemented soon.

The sobering reality we face now is an opportunity for the Philippines to adapt reforms and policies that will lead the country towards a resilient and sustainable recovery. With strong political will of the Duterte administration, we are optimistic that economic reforms in the pipeline will push through. Foreign investors and entrepreneurs - many of them virtually with us today -  are eager to see substantial progress in economic reform, further opening to foreign capital and improvement in the business climate.

For 3 decades now, the EU and the Philippines have established a relationship characterized by our shared goal of peace and prosperity for our peoples. Our relation remains constructive.

 

In terms of development cooperation the EU is working closely with the Government to support the recovery efforts in particular in the areas of renewable energy, agriculture as well as development and peace in Mindanao. The EU is starting up four large programmes (three in Mindanao; one on justice/human rights) and has two more in the pipeline (one Mindanao and one on satellite connectivity) for a total of EUR 150 million. By focusing on vulnerable groups and agricultural recovery the programmes are quite spot on in addressing the wider impact of COVID. We are also launching a programme focusing on trade facilitation and quality infrastructure which will directly support economic recovery.

 

In the key sector of international trade, while we have seen a steady growth of the  bilateral trade flows over the last years, which reached the level of 15 billion euros of total trade in 2019, the EU-PH trade today is far from its full potential. It does not help too that trade between the EU and the Philippines in the first 9 months of 2020 has declined by more than 20%. But apart from the evident impact of COVID, it remains a fact that when we compare EU-Philippines trade with other countries in Southeast Asia, we note that EU-Vietnam total trade surpass EU-PH trade by 3 times, and EU-Thailand more than 2.5 times. Surely, there is ample margin to do more and also to recover the ground lost during the pandemics.  

 

From an investment angle, the EU continues to see the Philippines as a large, fast growing market. However, the Philippines does not succeed in mobilising European traders and investors in line with the size and potentiality of the PH market. For instance, it is useful to remind that on a yearly basis, the Philippines attracts only 4% of the total EU FDI directed towards ASEAN countries.

This is not a lost case though. In fact, the Philippines have a number of mechanisms it can utilize to its advantage. Allow me to name a few:

First, the Philippines is a member of the World Trade Organization since 1995. In crises like where we are now, the EU appreciates that the Philippines did not impose trade and non-trade barriers and stayed on the track of rules-based and multilateral trading when some other countries opted to close its borders. This is the best way forward for creating a favourable business climate that continues to attract new investments and favour the harmonious development of mutually beneficial trade relations.

You may also recall that last year, the Philippines was granted observer status by the WTO Government Procurement Agreement Committee. This is a good step forward for the Philippines. In this context, the EU and the Philippines should continue to strengthen the advocacies to ensure level playing field. Supporting and adhering to rules-based and international standards will prepare the country for a region to region and bilateral trade agreements in the future.  

At bilateral level, the EU-Philippines Partnership and Cooperation Agreement (PCA) can be a framework for dialogue and cooperation to further strengthen our commercial relations through the establishment of the Economic and Trade subcommittee. The Philippines can also maximize its access to the European market, as already successfully done by the likes of Jollibee and port operator International Container Terminal Services Inc. (ICTSI).

 

The EU GSP+ also provides an entry point for Filipino products to the EU market to have a stronger foothold in the global value chain. Every year about EUR 2 billion worth of Filipino products – with a strong performance for agriculture products – enter the EU duty free. We look forward to continue a fruitful collaboration with the Philippines for the correct implementation of GSP+ for the years to come, especially in the respect of human rights conventions subscribed by the Philippines.  Being the only country in Southeast Asia that enjoys this EU trade preference, this is an opportunity for the Philippines to make more business with Europe.

 

While the focus of the Philippine Government and Congress is to achieve a sustainable recovery from this global crisis, we recognize that important policy reforms are on-going in the Philippines, which, when coupled with full implementation, will be beneficial to businesses and investors. In particular, we hope to see the full implementation of the Customs Modernization, the Ease of Doing Business and the amended Corporation Code. We also wish for the completion of the Tax Reform Package, the passage of laws to liberalise foreign investments, to amend public services act and, retail trade liberalisation.

 

Specifically, with the on-going debate on the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, the EU hopes that this piece of legislation will help attract more companies, including EU businesses to locate in the Philippines. Likewise, we hope that the uncertainties revolving around this reform be cleared soon, and a good compromise for businesses especially locators in economic zones be implemented.

 

We wish for the Philippines to get more European investors to enter the Philippine market to create more quality jobs and to contribute to the country's economic growth. This is especially true now as the country is working to revive the economy and provide more quality jobs to Filipinos in particular for those overseas Filipino workers who were repatriated due to the COVID-19 pandemic. One way to ensure this is to provide certainty and security in terms of competitive tax rates and fiscal incentives for investors, including foreign ones.

 

So let's continue working so that in the next years we will all be able to recover from this crisis and our people will take full advantage of the promise of a more sustainable and inclusive economies. With all the changes going on around us, let us exert effort to create a level playing field and opportunities for industries and sectors for more players to be able to participate; to provide more choices to our consumers; and to promote a sustainable approach to trade.

 

Our ways of doing things  are changing. Who knows for how long?

 

Thank you! Thank you also for inviting me together with EU member states ambassadors and colleagues.

Once again, I congratulate the organisers of this year’s EU-Philippines Business Summit and I wish you a fruitful discussion ahead.

Stay safe and stay in touch.

•  Honorable Trade Secretary Ramon Lopez, [Placeholder for other government officials]

•  Your Excellencies and members of the diplomatic corps

•  Mr Nabil Francis, President of the ECCP,

•  Mr Florian Gottein, Executive Director of the ECCP

•  Business chambers and industry representatives, academe, colleagues, ladies and gentlemen

Good afternoon!

I would like to commend and congratulate the European Chamber of Commerce of the Philippines for this year's European-Philippine Business Summit. Your efforts and collaboration with the European national business chambers brought us all together virtually amidst the pandemic that forces us to be apart physically.

As an effect of the new normal, we are all witnessing huge changes in the way we do things and in the manner businesses are conducted.

Prior to this health crisis that we all face, the EU economy was growing on solid grounds. All EU member states were seeing their economies expand and the continental economy was set to expand at a steady pace, supporting further job creation. In 2020 we were faced with a global health and economic crisis, which has been  particularly acute during the second quarter of the year and which, according to recent estimates, should contract the EU GDP in 2020 by about 8%.

 

 

To address these challenges, on 21 July – after long days and nights of negotiations –  EU leaders agreed on a recovery plan for Europe (Next Generation EU) as well as on the EU long-term budget 2021-2027. More than 50% of the EU budget – a total of some €1.8 trillion – will support modern policies and will set Europe on a path to a sustainable and resilient recovery. For Commission President Von Der Leyen, with Next Generation EU, “Europe has a once in a lifetime opportunity to make change happen by design to enable Europe to become green, digital and more resilient”. 

As all countries worldwide, the EU faces enormous economic challenges, and societal defies of an unprecedented complexity.  Understandably, the focus now is to temper the spread of the virus and its impact to lives and the economy. However, there are also other challenges that continue to linger, including  simmering trade wars and rising protectionism, which may have a heavy toll on future growth and create uncertainties in long established political relations. This includes Brexit. While there are still considerable uncertainties on the conclusion of this long and painful process, the EU is compelled to work hard to make its economy even more resilient through many useful and necessary economic and financial reforms.

Similarly, the Philippines show-cased a robust and long-lasting growth story with an impressive growth in the last decade and averaging around 6% growth in the last 5 years. The government was head on in tackling important reforms in the areas of taxation, infrastructure, foreign investments and social services, which have resulted to reduction in unemployment and poverty incidence in the pre-COVID period. The country’s sound economic fundamentals and improved credit ratings were helpful in providing cushion as the impact of the health and economic crises hit the region.

 

However, the current situation resulted to serious dents in unemployment and poverty incidence in urban and rural areas alike. In Southeast Asia, we have seen that the Philippines is one of the most negatively hit by the COVID-19 pandemic in terms of economic growth with GDP of growth contraction of 16% in the second quarter of 2020. In the same period, Vietnam managed to even grow by 0.4% while Indonesia and Singapore recorded contractions of 5.3% and 12.6% respectively. The Philippines Central Bank has estimated a GDP drop at year end between 6 and 8%.

At the moment, we see that the Philippines is slowly opening up the economy, also thanks to the emergency relief measures of 165.5 billion pesos (US$3.4 billion) adopted last September to expand healthcare and help businesses.

While this is an important step in the right direction, the business community in the Philippines expects also more long-due reforms affecting the country’s competitiveness and ease of doing business. This has been very evident during the extreme restrictions imposed to fight the COVID-19 transmission in the country. Many companies including the European businesses present in the country have experienced various challenges and issues as reflected in the EU funded study on the impact of Covid-19 on EU business in the Philippines published by the ECCP in August 2020. Let me here recall – among other things - that the cancellation of all working visas for incoming foreign professionals has seriously affected the operation of many EU companies in the Philippines and we do hope that a significant relaxation of such rules can be implemented soon.

The sobering reality we face now is an opportunity for the Philippines to adapt reforms and policies that will lead the country towards a resilient and sustainable recovery. With strong political will of the Duterte administration, we are optimistic that economic reforms in the pipeline will push through. Foreign investors and entrepreneurs - many of them virtually with us today -  are eager to see substantial progress in economic reform, further opening to foreign capital and improvement in the business climate.

For 3 decades now, the EU and the Philippines have established a relationship characterized by our shared goal of peace and prosperity for our peoples. Our relation remains constructive.

 

In terms of development cooperation the EU is working closely with the Government to support the recovery efforts in particular in the areas of renewable energy, agriculture as well as development and peace in Mindanao. The EU is starting up four large programmes (three in Mindanao; one on justice/human rights) and has two more in the pipeline (one Mindanao and one on satellite connectivity) for a total of EUR 150 million. By focusing on vulnerable groups and agricultural recovery the programmes are quite spot on in addressing the wider impact of COVID. We are also launching a programme focusing on trade facilitation and quality infrastructure which will directly support economic recovery.

 

In the key sector of international trade, while we have seen a steady growth of the  bilateral trade flows over the last years, which reached the level of 15 billion euros of total trade in 2019, the EU-PH trade today is far from its full potential. It does not help too that trade between the EU and the Philippines in the first 9 months of 2020 has declined by more than 20%. But apart from the evident impact of COVID, it remains a fact that when we compare EU-Philippines trade with other countries in Southeast Asia, we note that EU-Vietnam total trade surpass EU-PH trade by 3 times, and EU-Thailand more than 2.5 times. Surely, there is ample margin to do more and also to recover the ground lost during the pandemics.  

 

From an investment angle, the EU continues to see the Philippines as a large, fast growing market. However, the Philippines does not succeed in mobilising European traders and investors in line with the size and potentiality of the PH market. For instance, it is useful to remind that on a yearly basis, the Philippines attracts only 4% of the total EU FDI directed towards ASEAN countries.

This is not a lost case though. In fact, the Philippines have a number of mechanisms it can utilize to its advantage. Allow me to name a few:

First, the Philippines is a member of the World Trade Organization since 1995. In crises like where we are now, the EU appreciates that the Philippines did not impose trade and non-trade barriers and stayed on the track of rules-based and multilateral trading when some other countries opted to close its borders. This is the best way forward for creating a favourable business climate that continues to attract new investments and favour the harmonious development of mutually beneficial trade relations.

You may also recall that last year, the Philippines was granted observer status by the WTO Government Procurement Agreement Committee. This is a good step forward for the Philippines. In this context, the EU and the Philippines should continue to strengthen the advocacies to ensure level playing field. Supporting and adhering to rules-based and international standards will prepare the country for a region to region and bilateral trade agreements in the future.  

At bilateral level, the EU-Philippines Partnership and Cooperation Agreement (PCA) can be a framework for dialogue and cooperation to further strengthen our commercial relations through the establishment of the Economic and Trade subcommittee. The Philippines can also maximize its access to the European market, as already successfully done by the likes of Jollibee and port operator International Container Terminal Services Inc. (ICTSI).

 

The EU GSP+ also provides an entry point for Filipino products to the EU market to have a stronger foothold in the global value chain. Every year about EUR 2 billion worth of Filipino products – with a strong performance for agriculture products – enter the EU duty free. We look forward to continue a fruitful collaboration with the Philippines for the correct implementation of GSP+ for the years to come, especially in the respect of human rights conventions subscribed by the Philippines.  Being the only country in Southeast Asia that enjoys this EU trade preference, this is an opportunity for the Philippines to make more business with Europe.

 

While the focus of the Philippine Government and Congress is to achieve a sustainable recovery from this global crisis, we recognize that important policy reforms are on-going in the Philippines, which, when coupled with full implementation, will be beneficial to businesses and investors. In particular, we hope to see the full implementation of the Customs Modernization, the Ease of Doing Business and the amended Corporation Code. We also wish for the completion of the Tax Reform Package, the passage of laws to liberalise foreign investments, to amend public services act and, retail trade liberalisation.

 

Specifically, with the on-going debate on the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, the EU hopes that this piece of legislation will help attract more companies, including EU businesses to locate in the Philippines. Likewise, we hope that the uncertainties revolving around this reform be cleared soon, and a good compromise for businesses especially locators in economic zones be implemented.

 

We wish for the Philippines to get more European investors to enter the Philippine market to create more quality jobs and to contribute to the country's economic growth. This is especially true now as the country is working to revive the economy and provide more quality jobs to Filipinos in particular for those overseas Filipino workers who were repatriated due to the COVID-19 pandemic. One way to ensure this is to provide certainty and security in terms of competitive tax rates and fiscal incentives for investors, including foreign ones.

 

So let's continue working so that in the next years we will all be able to recover from this crisis and our people will take full advantage of the promise of a more sustainable and inclusive economies. With all the changes going on around us, let us exert effort to create a level playing field and opportunities for industries and sectors for more players to be able to participate; to provide more choices to our consumers; and to promote a sustainable approach to trade.

 

Our ways of doing things  are changing. Who knows for how long?

 

Thank you! Thank you also for inviting me together with EU member states ambassadors and colleagues.

Once again, I congratulate the organisers of this year’s EU-Philippines Business Summit and I wish you a fruitful discussion ahead.

Stay safe and stay in touch.

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