The figures churned out by Soriano did not surprise Doris Magsaysay Ho of ABAC Philippines.

“You cannot expect the country to produce highly qualified workers when its manufacturing sector is hollowing out,” Ho opined. “What we need to do is to strengthen industrial competitiveness and tune up the quality of our education to global standards”, she added.

Ho further stressed that the government should aggressively promote collaborative arrangements between the local industries and academic institutions to better align qualifications of graduates to industry needs.

This will lay the groundwork for creating globally competitive industries and workforce that will make the country an important player in the global market, she also noted.

To facilitate these efforts, Dr. Rene Ofreneo, former Dean of the University of the Philippines School of Labor and Industrial Relations (UP-SOLAIR), opined that the country will have to slowdown its trade liberalization efforts in goods and push for greater international labor mobility.

Said study indicates that of 42 FTAs signed by APEC member economies, 10 of them have no chapter on labor mobility, and while 28 of these FTAs contain provisions on the movement of business or natural persons, only seven of them have labor chapters.

It likewise noted that there is an immediate need for some 36 million skilled workers in the US and Canada and 25 million in Russia. -- Ritchie Alburo, PHILEXPORT News and Features <--back

2. Alarm raised over new business policies with retroactive effects

The business community was alarmed over unpredictable changes in public policies affecting business operations in the country that may further drive away investors.

The alarm was sounded by Philippine Chamber of Commerce and Industry (PCCI) chairman Sergio R. Ortiz-Luis, Jr. after one of the big oil giants, Pilipinas Shell Petroleum Corporation reported a recent reversal of an old Bureau of Internal Revenue (BIR) policy that exempts imported raw materials in making premium gasoline from the payment of value added tax with retroactive effects.

Ortiz-Luis, who is also President of the Philippine Exporters Confederation, Inc. (PHILEXPORT), said that his organizations are not questioning the BIR's power to impose taxes to all types of legitimate businesses for what they raise gives the government more elbow room to deliver social services and build critical infrastructure.

“What alarms us is the intent of the new tax policy to take effect in the past, not after formulation. It is a dangerous precedent that violates the principles of law and policy making anywhere. And it is bound to scare further the few potential investors not yet turned off by other negative news about the country,” the business leader warned.

In its report, Pilipinas Shell claimed that the new BIR chief, Joel Tan-Torres recently issued a memorandum order, reversing the policy held by his predecessors, Jose Mario Bunag and Guillermo Parayno, allowing the VAT-free importation of catalyctic crack gasoline and light catalytic crack gasoline, vital ingredients in the manufacture of premium gasoline.

The old policy in effect since 2004, based its decision on the fact that refined premium gasoline using the vital ingredient, is subjected to VAT when withdrawn from the Shell refinery in Batangas for sale to consumers, the Shell report to PCCI said.

As a result of the retroactive effect of the new tax policy, Shell has been ordered by the tax bureau to pay P7.3 billion in back taxes.

“We leave the settling of whatever claims and counterclaims on what Shell owes the government to the courts. What unsettles the business sector is when a new policy that replaces an old one is made to take effect retroactively,” Ortiz-Luis explained.

Besides, local and foreign investors want to stake their capital in places where the rules are kept consistent, not subject to frequent changes that are bound to derail new investment projects and undermine viability, the export leader stressed.

“Businesses will always make plans based on existing policies at the time of investment. So you don’t change the rules midstream, because those are not the policies they started with,” said Ortiz-Luis. -- Abe P. Belena, PHILEXPORT News and Features <--back

3. Exports seen to recover this year

Export industry leaders are bullish the battered sector is going to stage a recovery this year.

Speaking before the first national meeting of the 3,000 strong Philippine Exporters Confederation, Inc. (PHILEXPORT), newly elected president of the umbrella organization of exporters Sergio R. Ortiz-Luis said “the year of the Tiger is the year of recovery for our sector”

“Recovery from a very difficult crisis we did not even create is a difficult climb as we have experienced during the trade slump of 2001. The first step is for us to have faith in ourselves that we can pull through,” Ortiz-Luis exhorted.

“Then we will work together and individually, to make it happen. We are over the hill now, “ he added after noting that the more year long two-digit retreat since October of 2008 slowed down to single digit ebb last October and went back to the positive path last November.

PHILEXPORT News and Interviews with key industry leaders after the conference showed that actual orders towards the end of last year and early this year are coming back.

First time PHILEXPORT trustee representing the furniture industry, Myrna Bituin, said orders from Europe and the Middle East are filling in the drastic decline in furniture demand from the United States.

“We may not yet be able to bring back the volume of furniture exports to pre-crisis levels. But if we can add exports to the newly prosperous countries in Asia, particularly China and India, plus sales of top quality furniture to Europe and the Middle East, we hope to get back on solid footing this year,” Bituin, a pillar of the furniture industry in Central Luzon said.

It will need hard work opening new markets since before the crisis, the United States took in up to 90 percent of exports from Central Luzon, she told PNF.

“Exporters in Cebu are recovering,” intimated Allan Suarez, Chairman of PHILEXPORT Cebu. “Fashion jewelry is staging a comeback, but furniture is still having a hard time.” He said that the furniture sector in Cebu held on the growth path in the first half of the year-long trade decline, but was hard hit in the second half of last year.

Almost all other sectors said that many of their members got through the long sales drought abroad as a result of the global recession by tailoring their products to the needs of the domestic market and selling locally.

In the case of the furniture sector, an increase in demand from new hotels and restaurants that mushroomed in different tourism centers in the country last year, plus new home built by OFW families made up for trickling orders from the US.

Ortiz-Luis revealed that under the Philippine Export Development Plan (PEDP) now being updated to deal with the lingering recession in the west and the impact of climate change on a big segment of the resource and food-based industries, intensification of export promotion to the Asian markets is one of the strategies. -- Abe P. Belena, PHILEXPORT News and Features <--back

4. Sen. Santiago pledges ratification of RKC

Feisty Senator Miriam Defensor Santiago yesterday pledged to do her best to get her colleagues to ratify the accession of the Philippines to the Revised Kyoto Convention (RKC) before Congress goes on final recess.

RKC is the global set of rules governing international trade.

The articles of accession to the RKC was signed by President Arroyo and sent for approval by the Senate early last year. Public hearings called by Senator Defensor’s committee on foreign affairs was concluded last October.

When RKC gets ratified, it will bind the Bureau of Customs into adopting the common, simpler and standardized system of customs administration our major trading partners have been practicing since February of 2006 when it took effect, Defensor explained.

It will make trading with the country easier, faster and cheaper and will lead to the return of private investors to the country, Defensor said.

She admitted though that clinching the approval of fellow Senators will be hard. She said that regular sessions will just be two weeks. After that, the present Senate will go on final recess.

“We only hold sessions Mondays, Tuesdays and Wednesdays. I have only six working days left within which to get the treaty ratified. I will charm my colleagues into approving it. If that will not work, I will use my training in martial arts,” she told importers, exporters, logistics companies and a big delegation of customs officials gathered in the RKC summit and pressing for RKC accession.

In a position read before Defensor’s address Trade Secretary Peter Favila and private sector chairman of the National Competitive Council, Ambassador Cesar Bautista, endorsed the accession, pointing out that the bulk of Philippine imports and exports are with trade partners of the Philippines that are now covered by the international customs rules treaty.

Abiding by the same treaty will be the practical route to go, the trade and competitiveness top officials said.

The president of the Port Users Confederation, an alliance of 24 business organizations involved in international trade, Dominador de Guzman, called the RKC ratification a monumental legislation that would advance the country’s bid to operate a modern customs system. -- Abe P. Belena, PHILEXPORT News and Features <--back

5. Repeal of DENR AO requiring registration of wood importers sought

A furniture exporter is calling for the revocation of an administration order requiring registration of companies intending to import wood products for re-export, stressing the tedious process only creates unnecessary red tape that makes the business climate in the country uncompetitive.

The repeal of AO 99-46 of the Department of Environment and Natural Resources (DENR) was sought by Nicolaas K. de Lange, president of Designs Ligna Inc., a major furniture exporter.

De Lange recalled that prior to November 2009, importers did not encounter such problem because the policy “has not been implemented”\ at the ports for a long time”.

“As far as we are concerned, it (AO) has never been consistently enforced and is now being enforced by employees of BoC (Bureau of Customs) who are out to make money for themselves off unsuspecting importers and manufacturers,” he said.

De Lange said they had no recourse then but to secure a certificate of registration from the DENR which also required submission of shipment contract with supplier abroad.

He said the AO also requires companies to pay fees and bonds and submit monthly reports to the DENR before it releases the certificate.

De Lange, also a former trustee of the furniture sector of the Philippine Export Confederation, Inc. (PHILEXPORT) and past president of the Chamber of Furniture Industries of the Philippines, stressed that if the policy aims to monitor incoming wood imports, the DENR can secure such information even in the absence of the AO.

“The DENR does not need a law to achieve this objective. It can obtain this information from existing sources of other agencies such as the BOC or NSO (National Statistics Office). It could also require reports or copies of import documents without imposing all the stringent requirements it has imposed in AO 99-46,” he said.

De Lange said this situation is putting added strain on exporters especially the furniture industry.

“Red tape causes wasted man-hours and unnecessary costs, not to mention the additional costs attributable to corruption, make companies less competitive in the global market,” he said.

“The law should be suspended to relieve suffering companies from the agony they are currently experiencing from certain BoC employees. EO 99-46 can then be reviewed and hopefully be revoked once and for all,” he added.

In a separate meeting called by the Export Development Council to thresh out the issues, the BOC representatives clarified that the possible lapse in implementation happened whenever the DENR representative was absent from its post at the port. Otherwise, the DENR representative could have stamped the documents that would have been the BOC signal for the release of the imported wood.

They also cited that this incident, that almost cost the imported materials to be seized because of the reported delay in submission of the documents, was proof that the BOC is really implementing the policy.

Meanwhile, the DENR representative in the same meeting noted that the repeal would need an amendment of the Forestry Code of the Philippines. -- Danielle Venz, PHILEXPORT News and Features <--back

6. Slight revenue increase raises hope of export recovery

Exporters are hopeful the market will achieve recovery from global crisis which augurs well for the country’s economic growth.

This optimism was expressed by Philippine Exporters Confederation, Inc. (PHILEXPORT) president Sergio Ortiz-Luis Jr. amid the 5.1-percent year-on-year exports growth in November 2009 that ended 13 months of continuous contraction.

Total exports during the month surged mainly due to a rebound in electronics shipments which posted its first actual recovery after 12 months of double-digit declines at 6.9 percent. Electronics comprise 70 percent of the country’s exports.

“I believe that this improvement is a reliable indicator of better things to come for the industry,” he said.

The PHILEXPORT chief said the November exports figure affirmed that the sector’s year-end positive growth earlier projected is achievable.

With this, Ortiz-Luis said he looked forward seeing the economy particularly the exports sector to recover after crisis losses.

“From latest export figures at least, this do not seem to be wishful thinking, as improving industry performance provides a solid basis for this possibility,” he stressed.

Ortiz-Luis credited the fast recovery from the global financial meltdown to the government’s efforts in preparing and cushioning the economy from its irreversible damage.

“Because of this, I see the country coming out of this crisis better than usual and perhaps even ahead of others, unlike in many other crises we went through,” he said. “This spells tremendous opportunities that, with focused government assistance, can help propel the economy forward.”

Ortiz-Luis projected the exports industry to post a 10-percent growth in 2010, with the electronics and business process outsourcing sectors among its key growth drivers.

This was a reversal from the negative growth seen for the sector last year. In January to November 2009, aggregate merchandise exports declined by 24.6 percent. -- Danielle Venz, PHILEXPORT News and Features <--back

7. Information-based services on FTAs, improved ROO system sought

The Philippines has been asked to provide the local companies with more information-based services on free trade agreements (FTAs) and simplify the rules of origin (ROO) system to raise its overall usage of FTAs.

This recommendation was made by a study titled “FTAs and Philippine Business: Evidence from Transport, Food and Electronics Firms” published by the Asian Development Bank showing that only 20 percent of 155 surveyed firms from transport, food and electronics were using or have benefited from the ASEAN Free Trade Area (AFTA).

“A lack of information was an impediment to 93.6% of non-users in the food sector, 76.7% in electronics, and 61.1% in transport. Within the size groupings, a lack of information was reported to be a barrier by 84% of small, nonuser firms,” it noted.

This, even as the study recognized the government and private sector entities’ efforts to disseminate information and raise industry participation in FTAs involving the Philippines.

Survey result indicated that existing information-related services on FTAs may be inadequate or need improvement in terms of the quality and depth of FTA support made available.

“Interagency coordination and public-private cooperation is required to identify which information is needed by whom. This will also avoid the duplication of effort and result in a more strategic and fruitful information campaign,” it noted.

Firms specifically demanded more FTA awareness training, more studies on the impact of FTAs on business, consultation during FTA negotiations and monitoring and surveillance of nontariff measures.

Seminars and other forms of training could also expanded --from providing basic information to laying down step-by-step procedures­ and tailored to each type of industry or sector to be more relevant to firms.

They also sought FTA-related technology support and small and medium enterprises (SMEs) extension services.

Likewise, companies raised the need for the country to improve the AFTA ROO, which refers to the set of criteria used to determine the country or customs territory of a good’s origin.

“A simpler ROO regime –-e.g., with harmonized tariff classification and origin rules, alternative rules, standardized and streamlined procedures, self-certification features, a one-stop export documentation facility would promote the use of FTAs among firms,” the study pointed out.

Along with the reduction of the ROO’s value content requirement, these improvements could encourage FTA use among 43 percent of nonusers, “potentially increasing the overall utilization rate from 20 percent to 54.2 percent.”

“While multiple ROO are not costly, harmonization is preferred,” the ADB study stressed.

Transport firms, which use AFTA the most, identified positive impacts of the agreement, foremost of these are lower tariffs and increased export sales.

However, most food firms see more benefit in new business opportunities and the concentration of production than in improved market access. They also hoped that FTAs will open channels to non-traditional markets such as the Middle East.

On the other hand, electronic companies benefit AFTA with their access to cheaper intermediate goods due to lower tariffs. -- Danielle Venz, PHILEXPORT News and Features <--back