Trade 1

An Interview with Commercial Counselor Kenneth T. Yap of the Philippine Embassy in Washington, DC


Secretary of Commerce Gina Raimondo recently visited the Philippines representing President Joseph R. Biden in leading the first-of-its-kind US Presidential Trade and Investment Mission, marking a long-term strategic realignment for the two traditional allies in the Indo-Pacific.

The First Presidential Trade and Investment Mission

From March 11 to 12, 2024, US Secretary of Commerce Gina Raimondo led a delegation of top executives from 22 notable American businesses and non-profits during a landmark Presidential Trade and Investment Mission (PTIM) to the Philippines. In their meeting, Secretary Raimondo and Philippine President Ferdinand Marcos Jr. talked about working together to fortify trade relations, create robust supply chains in the Indo-Pacific region, and put an emphasis on how crucial it is for the United States to have robust bilateral trade and investment ties with the Philippines.

The PTIM was months in the making and was initiated in November 2023. US President Joseph R. Biden formed and committed the trade mission with President Marcos Jr. during the 30th APEC Economic Leaders’ Meeting in San Francisco. President Marcos Jr. went back to the Philippines with investment pledges estimated to be around $670 million and emphasized that the United States has never sent a presidential delegation of this nature to any country before, and that this landmark mission indicates the enduring strength of the bilateral relationship.

The trade mission was a success, resulting in American firms and nonprofits in the delegation committing $1 billion worth of investments into the Philippines. According to Secretary Raimondo, the investments would be made in industries such as solar energy, electric vehicles, and the digital economy, which would generate educational and professional opportunities for Filipinos. Some notable investments came from the following companies: the Foundation, Google, Meta, Microsoft, United Airlines, US-ASEAN Business Council, and Visa.

An Interview with the Philippine Commercial Counselor:

(Commercial Counselor Kenneth T. Yap with the Philippine Department of Trade and Industry Secretary Alfredo E. Pascual)

The East-West Center in Washington sat down with Commercial Counselor Kenneth T. Yap of the Philippine Embassy in Washington, DC to understand his insights on the US-Philippines commercial relationship:

What mutual benefits do you believe both the Philippines and the United States can derive from strengthening their commercial ties?

Strengthening US-Philippines commercial ties [through] investments and a Free Trade Agreement (FTA) can increase two-way trade, create jobs, strengthen and diversify supply chains, and project the positive influence of the United States in Asia. The Philippines is the 8th largest market for US agricultural exports and the top market in Southeast Asia. In 2021, the Philippines imported around $3.5 billion worth of agricultural products from the United States. These agriculture product imports are soybean meal $960M, wheat $871M, dairy products $437M, pork $204M, corn, frozen potatoes, beef, processed vegetables, and other food preparations. (note: this is based on USDA data).

A carefully negotiated FTA would benefit US farmers and agriculture and food companies and can also open the US market to Philippine products which will be beneficial to both countries. The United States and the Philippines are long term defense and security allies [through] the Mutual Defense Treaty of 1951. Strengthening both countries’ economic relations will ensure economic stability for both the Philippines and the United States and will give the [latter] a stronger and economically prosperous ally in Asia.

What specific sectors or industries do you see as having the most potential for growth in bilateral trade between the United States and the Philippines and which US states offer the most potential?

Agriculture and food, semiconductors and electronics, clean and renewable energy, critical minerals (nickel, copper, cobalt), electric batteries and electric vehicles, telecommunications, aerospace, pharmaceuticals, and IT-BPM (information technology and business process management). There is increased recognition by both the Philippine and US governments, as well as country allies (e.g. Japan, Australia, the European Union, etc.) that peace and security in the West Philippine Sea and Taiwan Strait is integral to maintaining the free flow of goods through this sea-lane (over 60% of global maritime trade passes [through] which constitute up to 22% of total global trade annually).

Consequently, the Philippines is poised to benefit from investments in defense (industry) and related technologies aimed to defend and protect our national security interests. This is not just military platforms and equipment but includes logistics, warehouses/fuel depots, as well as articles required during disasters and mass evacuations. The Philippine Trade and Investment Center in DC has already seen considerable upticks in inquiries from US companies wanting to invest in the Philippines on MRO (maintenance, repair, and overhaul) facilities for ships (primarily), fuel depots, HADR (Human Assistance Disaster Relief) goods supply and manufacturing, and even in cybersecurity companies exploring partnerships with Philippine-based companies.

Has there been interest at the US state level (e.g., governor offices) in increasing business investments in the Philippines?

We have seen increased investment interest by US companies in the following industries: IT-BPM including Health Information Management Services (HIMS), semiconductors, IC (integrated circuit) design, electronics, telecommunications aerospace, agriculture, and food.

In your opinion, what are the key challenges hindering further expansion of US investments in the Philippines, and what strategies are being employed to address these challenges?

There is a need to reach out to potential US investors to make them aware of the capabilities of the Filipino workforce, the incentives and advantages of doing business in the country, and the policy reforms that now enable more foreign investment across industries. The amendments to the Public Services Act and the Renewable Energy Act, for example, allow up to 100% foreign ownership in several areas that were previously limited to Filipino ownership.

With the amended Renewable Energy Act, foreign investors can now hold 100 percent equity in the exploration, development, and utilization of solar, wind, hydro, and ocean or tidal energy resources. The amended Public Services Act will enable full foreign ownership of businesses in airports, railways, expressways, and telecommunications.

In addition, there needs to be a similar law passed to make investments in defense-related sectors more transparent and streamlined. Most US defense companies are used to very rigorous but faster transactions because records are digital here in the United States, especially in setting up companies. There are clear guidelines on financing (defense investments are almost always big-ticket items) that make such investments palatable to funding institutions unrelated to the government or have no experience in funding defense/logistics prospects. The taxes are also much clearer, especially if the companies are dealing with US federal agencies (i.e., say, the US military wanting to purchase goods/services “made in the Philippines”). This is really a green field type of opportunity for the Philippines because, unlike the United States, Japan, Singapore, Australia, etc., we do not really have a defense industry to speak of. Frankly, since we [do not have] much choice in the perils posed by our geography, we ought to focus instead on taking full advantage of the opportunities it presents us. Nowhere is this truer than in the strategic role the Philippines plays in maintaining peace and the rule of law in the West Philippine Sea.

Are there any specific initiatives or programs that the Commercial Service is involved in to promote trade and investment between the United States and the Philippines, and how can interested parties participate?

We have regular Philippine Economic Briefings held in Washington, DC usually during the World Bank meetings, Business Missions promoting IT-BPM (Florida, Las Vegas), and Investment Seminars held in New York, Los Angeles, San Francisco, and Washington, DC throughout the year. We also [have] Philippine Trade and Investment Centers in Washington, New York, San Francisco, and Los Angeles [which] can be approached for specific requirements by potential investors.

A Long-Term Strategic Realignment

Following a pivot from previous administrations which opted to explore strengthened ties with China, the current trajectory of the Philippines’ relationship with the United States indicates a long-term realignment. The two countries have been historical allies following the Philippines’ independence from the United States and the latter’s influence on Filipino society remains palpable to this very day. With increasing geopolitical tensions observed globally, firmly cementing the US-Philippines alliance on multiple fronts accords both countries a reliable partnership in the Indo-Pacific.

The author would like to thank Commercial Counselor Kenneth T. Yap and Julius Doruelo of the Philippine Trade and Investment Center in Washington, DC for their generous time and insights.

Kyle Ta-ay was a participant of the East-West Center in Washington’s Young Professionals Program in Spring 2024. He is also a member of the Young Leaders Program of the Pacific Forum in Honolulu. He recently received his M.A. in International Affairs: Global Governance, Politics, and Security from American University’s School of International Service and was a 2024 Outstanding Service awardee.