FINALS Flashcards
which include all types of physical goods exported and imported
Visible Items
which include all those services whose export and import are not visible. e.g. transport services, medical services etc.
Invisible items
which are concerned with capital receipts and capital payment.
Capital Transfers
is a systematic record of all economic transactions between the residents of the reporting country and residents of foreign countries during a given period of time”.
It is a double entry system of record of all economic transactions between the residents of the country and the rest of the world carried out in a specific period of time
The Balance of Payments
The difference between a country’s imports and its exports. the largest component of a country’s balance of payments.
Balance of Trade
include imports,foreign aid, domestics pending abroad and domestic investments abroad.
Debit Items
include exports, foreign
Spending in the domestic economy and foreign investments in the domestic economy.
Credit Items
What is the difference between balance of trade and balance of payments
The Balance of Payment takes into account
All the transaction with the rest of the worlds
The Balance of Trade takes into account all the trade transaction with the rest of the worlds
What is the general rule of balance of payments accounting?
If a transaction earns foreign currency for the nation, it is a credit and is recorded as a plus item.
If a transaction involves spending of foreign currency it is a debit and is recorded as a negative item.
The various components of a BOP
statement
Current Account
Capital Account
Reserve Account
Errors & Omissions
a statement of actual receipts and payments in short period.
It includes the value of export and imports of both visible and invisible goods.
export & import of services, interests, profits, dividends and unilateral receipts/payments from/to abroad
BOP on current account
Merchandise: exports - imports of goods
Services: exports - imports of services
Trade Balance
Net investment income: net income receipts from assets
Net international compensation to employees: net compensation of Employees
Income Balance
Gifts from foreign countries minus gifts to foreign countries
Net Unilateral Transfers
records all international transactions that involve a resident of the country concerned changing either his assets with or his liabilities to a resident of another country. Transactions in the capital account reflect a change in a stock – either assets or liabilities.
Capital Account
Capital Account balance are classified into two main categories
Direct foreign investments
Portfolio investments
Other capital
Three accounts: IMF, SDR, & Reserve and Monetary Gold are collectively called as
The Reserve Account
contains purchases (credits) and re- purchase (debits) from International Monetary Fund
IMF Account
are a reserve asset created by IMF and allocated from time to time to member countries. It can be used to settle international payments between monetary authorities of two different countries.
Special Drawing Rights
The entries under this head relate mainly to leads and lags in reporting of transactions
It is of a balancing entry and is needed to offset the overstated or understated components.
Errors and Omissions
means its condition of Surplus Or deficit
disequilibrium in the balance of Payment
occurs when Total Receipts exceeds Total Payments. Thus,
BOP= CREDIT>DEBIT
Surplus in the BOP
occurs when Total Payments exceeds Total Receipts. Thus,
BOP= CREDIT<DEBIT
Deficit in the BOP
What are the causes of Disequilibrium In The BOP
Cyclical fluctuations
Short fall in the exports
Economic Development
Rapid increase in population
Structural Changes
Natural Calamities
International Capital Movements
It is concerned with money supply and credit in the economy. The Central Bank may expand or contract the money supply in the economy through appropriate measures which will affect the prices.
Monetary Policy
government’s policy on income and expenditure. Government incurs development and non - development expenditure,. It gets income through taxation and non - tax sources. Depending upon the
situation governments expenditure may be increased or decreased.
Fiscal Policy
By reducing the value of the domestic currency, government can correct the disequilibrium in the BoP in the economy. This reduces the value of home currency in relation to foreign currency. As a result, import becomes costlier and export become cheaper. It also leads to inflationary trends in the country,
Exchange Rate Depreciation
It is lowering the exchange value of the official currency. When a country is in this state of its currency, exports becomes cheaper and imports become expensive which causes a reduction in the BOP deficit.
Devaluation
the reduction in the quantity of money to reduce prices and incomes. In the domestic market, when the currency is in this state, there is a decrease in the income of the people. This puts curb on consumption and government can increase exports and earn more foreign exchange.
Deflation
All exporters are directed by the monetary authority to surrender their foreign exchange earnings, and the total available foreign exchange is rationed among the licensed importers. The license-holder can import any
good but amount if fixed by monetary authority.
Exchange Control
To control this, the country may adopt measures to stimulate exports
like:
export duties may be reduced to boost exports
cash assistance, subsidies can be given to exporters to increase exports
goods meant for exports can be exempted from all types of taxes.
Export Promotion
Steps may be taken to encourage the production of this. This will
save foreign exchange in the short run by replacing the use of imports by these.
Import Substitutes
may be kept in check through the adoption of a wide variety of measures like quotas and tariffs. Under the quota system, the government fixes the maximum quantity of goods and services that can be imported during a particular time period.
Import Control
Under this system, the government may fix and permit the maximum quantity or value of a commodity to be imported during a given period. By restricting imports through this, the deficit is reduced and the balance of payments position is improved.
Quotas
are duties (taxes) imposed on imports. When these are imposed, the prices of imports would increase to the extent of this. The increased prices will reduced the demand for imported goods and at the same time induce domestic producers to produce more of import substitutes
Tariffs
What are the Philippines’ top export destinations
China
Japan
United States
Singapore
What are the Philippines’top import destinations
China
Japan
Korea
United States
Thailand
How to register as an importer?
Import Clearance Certificate from the Bureau of Internal Revenue Bureau of Customs (BOC) and set up an account with the Client Profile Registration System (CPRS)
How to register as an exporter?
First time exporters need to register
with the CPRS through the Philippine
Exporters Confederation.
For importers
Buinesses importing into the Philippines must provide the following documents when their goods arrive:
Packing list;
Invoice;
Bill of lading;
Import Permit;
Customs Import Declaration; and
Certificate of Origin.
Required documents
For exporters
Businesses exporting out of the Philippines must provide the following documents before their goods depart:
Packing List;
Invoice;
Bill of Lading;
Export License;
Customs Export Declaration; and
Certificate of Origin.
Certain products require government permission to be exported. Below is a detailed list of products requiring additional permission
as well as the concerned government authority:
• Endangered species of flora and fauna (Bureau of Biodiversity Management);
• animal products (Bureau of Animal Industry);
• fish products (Bureau of Fisheries and Aquatic Resources);
• Plants (Bureau of Plant Industry);
• Rice (National Food Authority);
• Radioactive materials (Philippine Nuclear Research Institute) and;
• Sugar and molasses (Sugar Regulatory Administration).
Tariffs and Taxes
For importer
The Philippines follows the United Nation’s Standard International Trade Classification (SITC). Import tariffs can range from 0 to 65 percent. Imported goods in sectors which have high domestic production typically incur higher tariffs. For non- agricultural goods, tariffs average at 6.7 percent.
Tariffs and Taxes for exporters
The only exported good which incur a tariff are logs at 20 percent.
are exempted from paying taxes and tariffs on imported raw material and manufacturing equipment.
Business operating in Special Economic Zones
As stipulated in the Customs Modernization and Tariff Act, 2015, the main SEZs in the Philippines
include:
Clark Freeport Zone;
Poro Point Freeport Zone;
John Hay Special Economic Zone;
Subic Bay Freeport Zone;
Cagayan Special Economic Zone;
Zamboanga City Special Economic Zone and;
Freeport Area of Bataan.
The Philippines, by virtue of its membership in ASEAN, is also a party to the five FTAs that ASEAN has signed with the following countries or group of countries:
Australia and New Zealand;
China;
India;
Japan; and
Korea
