The Philippine petrochemical industry is lagging behind in the region and has a lot of catching up to do with its Asean neighbors, particularly Vietnam, Indonesia and Malaysia.
While these countries have embarked on aggressive expansions for their respective petrochemical industries, professional services firm KPMG Global Energy Institute said the Philippine petrochemical industry is still in its infancy compared to those of North Asia and Singapore.
KPMG in the study Asia Pacific’s Petrochemical Industry: A Tale of Contrasting Regions said “a factor affecting the viability of the industry is the subject of incentives, both fiscal and non-fiscal, that are made available to future plants. “
Excerpts of the study, released yesterday by the Association of Petrochemical Manufacturers of the Philippines (APMP) also identified major problems hampering competitiveness: direct and technical smuggling of competing petrochemical products, logistical concerns facing upstream-midstream-downstream facilities, trade agreements promoting tariff reductions for imported products, and the need for more ease in doing business.
KPMG also cited a surge in volumes of imported resins in recent years, with significant percentage coming from cost-advantaged origins that put the domestic petrochemical industry at a disadvantage. The influx of cheap competing resins, coupled with tariff reductions brought about by various trade agreements, undermine the long-term viability of this still-developing industry.
Fiscal support, KPMG added, is not yet at par with other Southeast Asian.
The APMP said it has been calling on government for solutions towards the issue of smuggling and customs modernization, the strengthening of fiscal incentives for both new builds and expansion projects, shortening the processing time of tax credit certificates, among other support structures to strengthen its competitiveness versus imported resins.
APMP is composed of six players resulting in over $3 billion in state-of-the-art petrochemical plants, almost 3 million metric tons (MT) of production capacity for various resin products, annual tax payments of 2.5 billion, and direct employment of over 5,000 Filipinos to date.
The largest member is JG Summit Petrochemical Corp., the biggest polyethylene and polypropylene resin manufacturer in the country, with an annual production capacity of over 510,000 MT of resin products.
