Since the treaty, dubbed the blueprint for simpler and harmonized customs system in the 21st century, 60 nations have abided by it, mostly the Philippines’ major trading partners that include the United States, Japan, the European Union and China.

In the ASEAN region, only Vietnam and Thailand had approved documents of accession ahead of the Philippines, while those of other members are still undergoing the accession process. --Abe P. Belena, PHILEXPORT News and Features <--back

2. MSME Magna Carta leads economic reforms by outgoing Congress

Expansion of the coverage of the Magna Carta for Small and Medium Enterprises to include micro businesses that also requires private banks to directly lend to MSME borrowers is among the most important economic reforms passed by the 14th Congress that went on final recess first weekend of February.

The amended Magna Carta was seen by the business community as an institutional solution to the perennial problem of tiny to medium-sized businesses getting access to credit from the banks. Its implementation is however marred by issues on penalties for non-compliance by banks. These are still being sorted out with the Bangko Sentral ng Pilipinas.

Another significant legislation for exporters was the law amending the Customs Brokers Act. The new version of the law no longer requires the signature of licensed brokers on export documents of duly registered exporters.

Also seen as landmark treaties that the Senate approved were the Japan-Philippines Economic Partnership Agreement (JPEPA) and the accession documents to the Revised Kyoto Convention, the global rules on customs administration.

The JPEPA was the first bilateral treaty the Philippines entered into since the Laurel-Langley Agreement expired in 1975. It is considered a landmark agreement in Asia for its trail-blazing agreement in the trade in services, particularly those of Filipino nurses, engineers and other professionals.

On the downside, in the priority list of legislative reforms sought by the exporting community and the Export Development Council, the Philippine Maritime Code intended to address the problem of prohibitive rates of inter-island freight and fares will need to be re-filed in the next Congress.

The proposed maritime law passed the committee level in the House of Representatives but had no counterpart bill in the Senate.

Another key legislation, the rationalization of fiscal incentives to different types of investments under a new Fiscal Investment Act, will also go back to square one in the 15th Congress. The proposed law was drawn to open similar incentives to all types of businesses with the special incentives to MSMEs retained.

A third major economic reform bill, the proposed Anti-Trust Act, also did not pass the legislative mill. Had it been enacted into law, the legal foundation for a system of preventing or averting anti-competition practices like monopolistic and cartel practices would have been set in place.

What took the cake, however, was what was seen as a major reform attempt that criminalizes technical smuggling, subject to severe jail terms and substantial fines. It did not reach the floor for debate in the Philippine Senate. -- Abe P. Belena, PHILEXPORT News and Features <--back

3. PHILEXPORT alarmed over BSP support to strong peso

The umbrella organization of Philippine exporters this week expressed alarm over a news statement quoting the Bangko Sentral ng Pilipinas (BSP) favoring a strong peso this year.

In a signed statement issued through the PHILEXPORT News and Features, Sergio R. Ortiz-Luis Jr., President of the Philippine Exporters Confederation (PHILEXPORT) said, “We view with grave concern the expressed bias for a strong peso by the Monetary Board, the policy-making body of the BSP, in a news story published in the February 3 issue of the Philippine Daily Inquirer.”

The export leader further said BSP betrayed its bias in favor of imports when it said, “the appreciation of the peso as a result of foreign exchange inflows could temper the increase in prices of imported commodities.”

“We wish to warn monetary authorities that expressing its support to a strong peso could undermine the health of the real economy.

For one, domestic industries competing with cheap imports may simply be wiped out. The farming sector that is already competing with imported products at minimal tariffs is equally threatened.

The same grim scenario is true for the export sector, where the prospect of a strong peso will derail its recovery, even as it is already beginning to gain back lost grounds after getting battered by double-digit retreat for 15 successive months since October of 2008.

“We are deeply puzzled and concerned about the continued foreign borrowings of government, when there is so much liquidity in the market,” said Ortiz-Luis Jr. “These dollars are possibly another source of the peso’s artificial strength.”

Due to the almost collapse of the global economy as a result of irresponsible players in the financial world, regulators across the globe are now tightening controls on their operations. The same should be done by our own Bangko Sentral ng Pilipinas in balancing the need to rein in inflation and the over-all impact of its policy on the health of the national economy.” the export leader concluded. -- Abe P. Belena, PHILEXPORT News and Features <--back

4. Food exporters suspect sugar hoarding; urge immediate government action

Food exporters are reiterating their call for government to immediately step in to help avert the collapse of the food export industry due to possible supply manipulation.

Roberto C. Amores, president of the Philippine Food Exporters and Processors Organization (PHILFOODEX), in a statement provided to PHILEXPORT News and Features traced the very serious sugar crises not on inadequate supply, but a “price issue caused by illegal hoarding by profiteering unscrupulous merchants, based on SRA data we obtained”.

In the SRA record, given the demand of 2.31 million MT against an estimated stock of 2.6 million MT until end-August, the country, a net exporter of sugar, will have a carry-over of 290,000 MT for the 2010-2011 crop year starting September. Despite this adequate inventory level as of January, 2010 according to the Bureau of Agricultural Statistics, the price of refined sugar stood at an average of P52 per kilo up to P60 per kilo as opposed to last month’s P45 per kilo and year-ago rate of P36 per kilo.

Such findings disprove the results of an earlier dialogue between Sugar Regulatory Administrator Rafael Coscoluella and an alliance of food manufacturers, where Coscoluella traced the crisis to the surge in world prices of the sweetener.

Amores, also the vice president for agriculture of the Philippine Chamber of Commerce and Industry (PCCI) said that the inadequate supply has influenced the soaring sugar prices. He noted that with prices now hovering between P52 and P60 per kilo, sugar-based food manufacturers are in a losing proposition against more competitive ASEAN neighbors such as Thailand, Malaysia and Vietnam.

To save the exporters, Amores, also the Food Trustee of the Philippine Exporters Confederation, Inc. (PHILEXPORT), again appealed for the re-allocation of the “D” sugar to food exporters equivalent to two percent of domestic production, following the guidelines set by SRA;

The “D” sugar allocation of the export sector was terminated late last year by the SRA when domestic sugar prices started going up.

“Continued access to the competitively-priced “D” sugar is critical to food processors and exporters, as sugar imports are levied a duty of 38 percent (a protective tariff which rewarded until now the inefficient Philippine sugar industry sector),” said Amores. “Without the “D” sugar, food processors and exporters will be colossally disadvantaged and uncompetitive, since sugar as raw material for sugar-based processed products account for 30 to 40 percent of production cost.”

Another urgent action that Amores sought is the immediate duty-free importation of refined sugar for use by domestic manufacturers and food processors. He further pressed for the following interventions:

· allow exporters to draw from the strategic reserves that the SRA will later replace through import substitution while waiting for the imported sugar;

· government to check and monitor inventories of sugar millers and traders to determine if there are any physical hoardings (or unlawful stocking), believed to cause an artificial situation that could create an avenue for sugar prices to increase uncontrollably; and

· reorganize the SRA to include proper representation from the private sector coming from food processors/manufacturers and PCCI.

“Now a national crisis, the unabated surge in sugar prices is not only hurting food manufacturers but ordinary household consumers as well, many of whom have not yet recovered from the debilitating effect of typhoons Ondoy and Pepeng,” Amores said.

Amores expressed fears that if the high cost of sugar persists, many of the local food manufacturers, most of whom are still suffering from the effects of the lingering global economic crisis, may be forced to close shop and mass lay-off of workers. He noted that even the consuming public is already hurting from the worsening situation.

Need to revisit SRA mandate

Interviewed separately, Sergio R. Ortiz-Luis, Jr., president of PHILEXPORT, said that stakeholders are being misled in finding the culprit for the price increase in sugar and sugar products, including bread.

“It is plain and simple that SRA is to be blamed for the crisis we are in. It has turned to be a scourge to the Filipino people”, Ortiz-Luis Jr. stressed. SRA is supposed to improve the competitiveness of the sugar industry and its workers. And yet, even with over several decades of forced support through SRA, the industry has stagnated.

“The industry is still uncompetitive. And so is its labor, specifically the sacadas who have not improved their lot,” explained Ortiz-Luis Jr. “Meanwhile, this situation has stunted the growth of the sectors in the sugar supply chain. Worse, it is now hurting Filipino consumers who have to carry the brunt of the SRA policy.” Sugar is supposed to be a freely tradable commodity under all rules in a globalized market. “But we have to sacrifice other sectors for it in all trade negotiations,” he lamented.

This situation makes SRA irrelevant, as it failed to live up to its mandate. “At the very least, why does it have regulatory powers that put the rest of the country at a disadvantage?” he added. “It is indeed high time that the government and our legislators seriously and urgently address the SRA problem for the good of the country.” -- Liza C. Leong, PHILEXPORT News and Features <--back

5. Signs of export rebound emerge

Some exporters have started receiving inquiries and orders from a number of buyers that halted purchases in the midst of global economic crisis last year, strengthening expectations of a rebound for the exports sector this 2010.

“The market is turning around but very slowly. We are getting inquiries but not necessarily orders right now,” said Chiqui Veneracion, managing director of Twenty Nine: Eleven Handicraft Trading.

She bared that a regular customer from France has just increased its purchases. Her company has also gotten orders again from South American clients.

Veneracion, also the vice president of the Philippine Chamber of Handicraft Industries (PCHI), said trade organizers in Paris and Hong Kong have also shown an increase in business activities.

Malou Balano, executive director of Philippine Exporters Confederation, Inc. (PHILEXPORT) Region 3, for her part, believed that the European market is showing signs of recovery, noting that some buyers that stopped purchases last year are now starting to order from some companies.

Balano said a report of Nertherlands-based Centre for the Promotion of Imports from developing countries (CBI) tackling furniture boom offers opportunities for the local manufacturers.

“Saving grace for our exporters is the vibrant local market. And they see this segment to grow or continue to be vibrant this year,” she pointed out.

To increase export sales despite the impact of the global crisis, Balano also raised the need for exporters to determine how the free trade agreements (FTAs) the Philippines forged with other countries would benefit them.

“The FTAs are positive signs that could trigger recovery of our exports,” she said, citing as an example the ASEAN-Australia-New Zealand Free Trade Agreement, the Japan-Philippines Economic Partnership Agreement and the Asean-China Free Trade Agreement.

Moreover, Balano said the more aggressive marketing efforts of the government are proving to be helpful in targeting more focused exports markets.

“(These are) buoying up the hope of the exporters to penetrate even the non-traditional markets,” she said, referring to outbound business matching (OBM) and inbound business matching (IBM) missions lined up by the Bureau of Export Trade Promotion (BETP) for this year.

In 2010, the BETP intends to conduct 23 OBMs to different countries and six IBMs where foreign buyers would come to the country to attend pre-arranged meetings with exporters. -- Danielle Venz, PHILEXPORT News and Features <--back

6. $1.3 million in food sales projected from OBM to Japan

Philippine food exporters target to generate sales of $1.3 million (around P62.4 million) through participating in an outbound business matching (OBM) mission for food to Japan, the country’s second top market, slated this February 25 to March 3.

The Bureau of Export Trade Promotion (BETP) said the OBM to be held in Osaka and Tokyo aims to optimize the benefits under Japan-Philippines Economic Partnership Agreement and explore opportunities at FOODEX 2010.

“(It will also) familiarize Philippine exporters with the Japanese business environment through one-on-one meetings with Japanese businessmen for an effective export-buyer matching process and direct promotion in the Japanese market,” it said in a statement.

The BETP, the export promotion arm of the Department of Trade and Industry, said that apart from the one-on-one business meetings, the OBM may also include merchandise surveys and benchmarking at FOODEX Japan 2010.

It said firming up of negotiations with the buyers has been scheduled on the last day of the mission.

Apart from the forthcoming OBM to Japan, the BETP will conduct more missions covering food products to help the market recover from the global economic slump.

Among the targeted markets to play host to these OBMs are Macau, India, Korea, Malaysia, Taipei, Italy, United States, Oman and Saudi Arabia.

Other OBMs the bureau intends to conduct this year cover auto parts, fine jewelry, furniture, houseware products, education service, wellness services, construction services and materials, content for film and television, personal care products and natural and organic products. -- Danielle Venz, PHILEXPORT News and Features <--back

7. Efficient border management, enhanced regional cooperation to improve trade logistics and facilitation

Countries intending to improve global trade logistics performance are advised to invest more in trade-related infrastructure, improve coordination of border processes and implement joint-border initiatives.

These recommendations were highlighted in the report titled Connecting to Compete 2010: Trade Logistics in the Global Economy recently released by the World Bank (WB).

The study identified the Philippines among the “top 10 most significant performers” along with Bangladesh, China, Democratic Republic of Congo, India, Madagascar, South Africa, Thailand, Uganda and Vietnam.

This, after the country’s ranking in logistics performance index (LPI) improved significantly to 44th among 155 countries this year. It ranked 65th out of 150 economies in 2007.

The report said traditional efforts to facilitate trade have focused on supporting trade infrastructure investment and modernizing customs, notably through the use of information technology.

“However, the focus needs to be extended to new areas of intervention highlighted in this report, such as the market for logistics services, the coordination of border processes, and the case for joint cross-border initiatives, especially to serve landlocked countries,” it said.

However, some of these efforts may require bilateral and regional cooperation schemes for trade facilitation reform to be effective, it pointed out.

The WB stressed the need to improve the quality of logistics and trade-supporting services, as it recognized that high quality is crucial to achieving effective trade and transport facilitation and associated regulatory reforms.

“…It is essential for the new trade facilitation agenda to focus on providing meaningful incentives to encourage high quality and reliable services, most notably through eliminating barriers to entry,” according to the report.

To improve border administration, the WB noted that apart from customs agency, countries need to improve collaboration among all border management agencies, including standards, sanitary, phytosanitary, transport and veterinary agencies; and introduce modern approaches to regulatory compliance.

“Delays and unexpected problems in quality and standards and in health and sanitary and phytosanitary areas have just as much potential as customs to create supply chain problems and this poor overall logistics performance,” it said.

Moreover, the Bank said efforts should target not only the corridor infrastructure but also the transit regime or regional agreements.

It noted that enhancing regional cooperation and implementing efficient transit systems on trade corridors are crucial. Other areas for logistics improvement cited include better transport policies, increasing competition in trade-related services such as trucking, freight forwarding and railways; and better trade-related infrastructure. -- Danielle Venz, PHILEXPORT News and Features <--back

8. RP set to maximize duty-free access to the Chinese market

The Philippines is set to capitalize on the opportunities burgeoning in the huge and dynamic Chinese market as tariff barriers dissipate.

Starting 1 January 2010, a vast majority of Philippine exports could enter the Chinese market duty free as the China-ASEAN free trade agreement (ACFTA) came into full force.

Under the Agreement, China and the six founding members of ASEAN – Brunei, Indonesia, Malaysia, Singapore, Thailand and the Philippines – are to eliminate investment barriers and duties on 90% of their imports.

In a bid to take full advantage of the benefits of the free trade deal, the government will be launching an information campaign regarding the preferential treatment of the goods the country trades with China.

Assistant Secretary Ramon Kabigting of the Bureau of International Trade Relations (BITR) noted that the country is set to go on the offensive while trying to address the challenges associated with further opening up the market to China.

There are a lot of opportunities brought forth by having preferential access to the Chinese market, both as a destination of our exports and as a source of our imports, Kabigting pointed out.

It is crucial that all the products we trade with China will get to be accorded preferential treatment to maximize the potential benefits of the free trade deal, he emphasized.

To serve this end, Kabigting intimated the earnest intent of the government to inform all stakeholders what preferential treatment the free trade pact provides and what procedures to follow to avail of this preferential treatment by working with PHILEXPORT and other relevant trade associations and organizations.

Kabigting likewise stressed that the country cannot be too antagonistic to free trade pacts when they could serve as an impetus for reforms and an opportunity to enhance our competitive position in the global market.

While the move to open up the country’s market to an economic giant such as China would readily spell trouble because of the competition, it is simply not the case when you look at the dynamics of Philippine trade with the Mainland.

As the Chinese economy surges ahead, its trade complementarity with the country increases. That is to say, the country’s exports increasingly complement China’s import needs and vice versa. Such is evident in the dramatic improvement in the Philippines’ trade relations with China, now its third largest trading partner, representing 9% of its total trade next to the United States and Japan.

In 2007, the country’s exports to and imports from China stood at $5 billion and $4 billion, respectively, yielding a trade surplus of $1 billion. In the last ten years or so, exports to China have been outpacing imports from the same. Exports registered a five-fold increase whereas imports more than doubled during period 2000-2005.

The immense expansion in the country’s exports to China is attributable to electronics, metal manufactures, processed food, tobacco products, fashion accessories, housewares, forest products, cutflowers, textile yarns, transport equipment, and non-metallic minerals. All of these products expanded by at least 100% during period 2000-2005.

Given this clear indication of strong bilateral trade relations, having duty-free access to the multi-trillion Chinese market provides the country a greater chance of upping the competitive position of its exports and of exploring beneficial trade with the world’s fast-rising economic powerhouse.

As ACFTA significantly reduces cross-border transaction costs and strengthens economic linkages between China and ASEAN, the said agreement is expected to facilitate the emergence of efficient global production sharing networks that will help lure in more investment to the country and enhance Philippine export competitiveness.

As well pointed out in several studies, there is considerable demand for product specification and differentiation in the global market. This provides a fair chance of finding a niche market, if only the Philippines responds to the impetus for greater efficiency, creativity and resourcefulness that freer trade engenders. -- Ritchie Alburo, PHILEXPORT News and Features <--back