Rural banks decry ASEAN free trade pact
BusinessWorld | 17 February 2010
Rural banks decry ASEAN free trade pact
Don Gil K. Carreon
RURAL BANKS said they stand to lose as tariffs on agricultural imports fall in line with a regional trade pact, since the agriculture sector is a primary market.
In a telephone interview on Tuesday, Rural Bankers Association of the Philippines (RBAP) President Joseph Omar O. Andaya said the agriculture sector would suffer greatly as tariffs on farm goods fall in line with the implementation of a free trade agreement among members of the Association of Southeast Asian Nations (ASEAN).
“It will affect us because 50% of the rural banking sector’s loan portfolio is lent to the agriculture sector,” he said.
“The rest is lent out mostly to micro and small enterprises in the countryside, which are largely linked to or dependent on agriculture.”
He added that around 90% of rural bank head offices and branches are in the countryside where the economy is agriculture-based.
In January, tariffs on several goods such as petroleum, chemicals, iron and steel, cars and parts, rubber, leather goods, textiles and garments, and glass were scrapped under the ASEAN Free Trade Area (AFTA).
Duties on certain farm goods — corn, cassava, poultry and pork — were reduced to 0-5%. The Philippines’ proposal to keep rice tariffs at 40% before lowering it to 35% in 2015 is being negotiated.
Mr. Andaya said the agriculture sector, which lacks support from the government, would suffer against competition from Thailand, Vietnam, Indonesia and Malaysia.
“Don’t implement [this agreement] for now. Give the agri sector support first because we would die if this sector dies,” he said.
Agriculture officials were not available for comment.
The RBAP chief said the government, to boost the agriculture sector, should shift the focus of the agrarian reform program to improving the education of and support for beneficiaries from just land redistribution.
He noted that most of the beneficiaries have been left to fend for themselves by the government.
Mr. Andaya said the RBAP, which has 650 members, has over six million depositors and a million borrowers, has commissioned a study on the impact of AFTA on the rural banking industry. The results will be released in two months.
Overseeing the study is Rolando T. Dy, executive director of the Center for Food and Agribusiness and dean of the School of Management at the University of Asia and the Pacific.
In a text message, Mr. Dy said the immediate sectors that are affected by the AFTA implementation are corn farmers and chicken and hog producers.
Tariffs on imported chicken and livestock were reduced last month to zero and 5% respectively, from 40% and 35% before.
