S.Korea inks FTA with Philippines, boon to Korean car exports   

South Korea has signed a free trade pact with the Philippines, which is expected to bolster Korean car exports to the Southeast Asian country with an immediate abolition of import tariffs on Korean vehicles.

Korea’s Trade Minister Ahn Duk-geun and his Philippine counterpart Alfredo Espinosa Pascual signed a free trade agreement (FTA) between the two nations on Thursday in Jakarta, Indonesia, on the sidelines of the Association of Southeast Asian Nations (ASEAN) summit, the Korean trade ministry announced.

Under the FTA, the 5% import duties on cars from Asia’s fourth-largest economy to the Southeast Asian country will be lifted immediately after the trade pact comes into effect. The two nations aim to ratify the agreement by the first half of next year.

The up to 30% import duties on Korean car parts will also be removed within five years, while those on Korean electric and hybrid vehicles will be lifted within five years.

Korea expects the FTA would help expand Korean car and auto parts exports to the Philippines, the No. 1 car importer among ASEAN member countries.

Japanese vehicles currently dominate the Southeast Asian country, with an 82.5% market share as of 2022, followed by those from the US with 7.0%, China 6.4% and Korea 2.5%. The total auto sales in the Philippines reached 366,000 units last year.  

The Philippines boasts the second-largest population in the ASEAN bloc, which is also the world’s 12th largest.

The Korea-Philippines FTA is also expected to beef up sales of Korean foods in the Southeast Asian country, where Korean cuisines are gaining in population thanks to the Korean pop-culture boom.

Under the bilateral trade pact, the Philippines’ import tariffs on processed foods (5-10%), ginseng (%0), peppers (5%), pears (7%) and mackerel (5%) from Korea will be lifted within 15 years.

Korea’s 30% import duties on bananas from the Philippines will also be removed in five years but on the condition of safeguard measures to control its import volume.

The bilateral FTA will lead to a tariff removal on 94.8% of all items shipped from the Philippines to Korea and 96.5% of all imports from Korea to the Philippines.

ASEAN, A LAND OF NEW OPPORTUNITIES

This is the fifth FTA Korea has signed with an individual ASEAN country after that with Singapore, Vietnam, Malaysia and Cambodia. The five countries together account for 91% of Korea’s total trade value with ASEAN, according to Korea’s Ministry of Trade, Industry and Energy.

Seoul already has an FTA with the ASEAN trade bloc and is a member of the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement among the Asia-Pacific nations of Australia, Brunei, Cambodia, China, Indonesia, Japan, South Korea, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, Thailand and Vietnam.

Asia’s fourth-largest economy, however, has been actively seeking separate deals with respective member nations to deepen diplomatic and economic ties in the ASEAN bloc, which is projected to be the world’s fifth-largest economy by 2026, according to FocusEconomics, a leading global provider of economic analysis and forecasts.

It projects the bloc’s total gross domestic product (GDP) will grow from $3.3 trillion in 2021 to $4.8 trillion in 2026.

ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Thailand, Singapore and Vietnam.

South Korean President Yoon Suk Yeol this week attended the ASEAN Summit 2023 in Jakarta, Indonesia with the country’s business delegation, including chiefs of Hyundai Motor Group and LG Group.

Hyundai Motor Co. and LG Energy Solution Ltd. are jointly building a battery cell plant in Indonesia, boasting ample mineral reserves and the biggest population in Southeast Asia.

The Philippines is Korea’s fifth-largest trade partner in ASEAN, with a trade value of $17.5 billion in 2022.

Korea has signed a total of 22 FTAs with 59 countries so far.

Write to Han-Shin Park at phs@hankyung.com
Sookyung Seo edited this article.