RIYADH, 12 June 2005 — As the Philippines marks its 107th Independence Day anniversary, it enjoys an excellent bilateral relationship with Saudi Arabia which hosts nearly one million Filipino workers.
“The Philippines and Saudi Arabia main-tain cordial and warm bilateral relations. Our country values its links with the Kingdom and looks forward to developing such links,” Ambassador Bahnarim A. Guinomla told Arab News.
The Philippine Embassy’s annual report added that such a relationship grew even stronger as a result of the visit of then President Fidel V. Ramos in 1994, which led to the signing of the RP-Saudi Bilateral Agreement for Economic, Trade, Investment and Technical Cooperation.
The exchange of notes of ratification on Nov. 11, 1996 of the RP-Saudi Agreement for Economic, Trade and Technical Cooperation has shown the desire of the two governments to improve their economic relations.
“We are, therefore, optimistic that this agreement will stimulate and further develop our trade relations and help build bridges of economic cooperation between our private sectors,” the report said.
The proposed RP-KSA Agreement on the Reciprocal Encouragement and Protection of Investments which is meant to further boost the economic relations between the two countries has been finalized and is ready for signing although it remains pending as both sides are still trying to find the appropriate date and venue.
The Philippines and Saudi Arabia have also been trying to firm up the schedule of the First Round of Negotiations on the RP-KSA Agreement on the Avoidance of Double Taxation, which covers, among others, the issue regarding the grant of reciprocal excise tax exemption to Philippine registered vessels on their purchase of petroleum products while docked in the Kingdom’s ports. The Bureau of Internal Revenue, the lead agency on this undertaking, has reportedly been having difficulty setting the appropriate date for hosting said negotiations in Manila.
It should be noted that the strength of RP’s trade ties with Saudi Arabia depends not only on the latter’s crucial role as the Philippines’ main supplier of oil. The trade in services has, for several decades, been favorable to the Philippines with the presence of currently almost one million Filipino workers in the Kingdom. Saudi Arabia has been the most favored destination of land-based workers as reflected in the POEA statistical records on deployment.
As a result, the Philippine central bank’s reports have also shown that Saudi Arabia is a major source of dollar remittances and ranks second only to the United States where about three million Filipino permanent residents are working. The total remittances reached $8.5 billion last year. And it is estimated that the actual level of OFWs’ foreign exchange remittances fueling the consumer-led Philippine economy could be as high as $14 billion since many of these OFWs send money through informal channels.
Reflecting the strength and foundation of the Saudi economy, oil has been the dominant export commodity in its foreign trade transactions. The same situation has been observed in the RP-KSA trade and commercial relations, which for decades have witnessed a trade imbalance in favor of the Kingdom. However, it is for the same reason — the Philippine’s oil requirements — that the importance of our economic relations with Saudi Arabia, particularly as a trading partner, cannot be underestimated.
In the Middle East region, the Kingdom ranked as the Philippines’ top trading partner and 12th among the 236 trading partners of the Philippines in 2003, according to statistics from the Department of Trade and Industry. Comparatively, Philippine trade with Saudi Arabia moved one level higher than in 2002, surpassing the UK and Indonesia, which now ranked 13th and 14th respectively.
In the same period, RP-KSA total bilateral trade amounted to $1. 23 billion or a share of 1.69 percent of the Philippines’ foreign trade. Bilateral trade is, however, immensely lopsided in favor of the Kingdom. Philippines’ total imports from the Kingdom are valued at $1.19 billion, placing KSA as 10th largest out of RP’s 222 foreign market sources with a 3.2 percent share.
Philippine exports to Saudi Arabia are valued at $41.24 million, or a 0.12 percent share of overall RP’s exports, ranking KSA the 28th among the 236 destinations of Philippine merchandise exports. This value is $521,332 less than the figure registered in 2002 or a charge of 1.25 percent in 2003.
The Philippines exports 571 products to the Kingdom. The top 20 products alone represent 70.36 percent of the total value, which is recorded at $29 million in 2003. Notably, these recorded a 10.51 percent increase from 2002 to 2003.
The top products are aviation fuel, bananas, wooden furniture, men’s wear, cigarettes, rattan furniture, steel-belted automobile tires, men’s and boy’s shirts, machine parts and accessories and beauty and skin preparations.
From January to October 2004, statistics showed that Philippine-Saudi trade remained heavily in favor of Saudi Arabia with a balance of $1.01 billion. Total trade between the two countries reached $1.07 billion, representing a 1.62 percent share of the Philippines’ overall foreign trade.
The trend from 2003 has thus far continued as regards the dimension of RP’s trade with KSA, which still ranks 12th biggest trading partner of the Philippines in the world. KSA’s weight as a trading partner is once again seen on the import side, which accounted for a 3.08 percent share of the total foreign market source of the Philippines.
By yearend, available data showed that RP-KSA bilateral trade merchandise reached $1.198 billion, registering a slight reduction compared to the 2003 figure. However, the difference is significantly almost the same as the Philippines’ export value, which was estimated at only $39.31 million.
RP’s exports comprised only 3.2 percent of the balance sheet. This means that trade deficit has again been recorded for RP, which has been steadily increasing in the past three years. This year, however, with the slowing down of the overall trade between the two countries as compared with last year, the value of trade deficit has likewise dropped.
On Sept. 23, 2003 a Memorandum of Understanding (MOU) between the Philippine Chamber of Commerce and Industry and the Council of Saudi Chambers of Commerce and Industry was signed for the establishment of the Joint Philippine-Saudi Business Council (JBC).
The Philippine side was eager to expand trade and business relations with the Saudi side, considering the perennial trade deficit the Philippines has with KSA. The CSCCI expressed the same enthusiasm during the signing of the MOU.
Efforts emanating from the private sector continued and were supported by the embassy even outside the framework of the RP-KSA JBC. During the Philippines International Furniture Show in 2004 (Feb. 2-March 2, 2004) the embassy exerted its best to invite and encourage more Saudi participation. As a result, the attendance of Saudi buyers increased by 108 percent and total book orders rose by 43.09 percent. Saudi Arabia ranked among the top ten countries in attendance and second among the top ten buying countries, which booked orders by $790,035.17 million.
“A business delegation from the Philippines came to Riyadh and Dammam in October 2004 as part of the CITEM’s project to promote Philippine food products in the Middle East,” Guinomla said.
The embassy facilitated their mini exhibits and one-on-one business meetings through the assistance of the Riyadh and Eastern province Chambers of Commerce and Industry.