In a span of one year, the value of the peso to a US dollar appreciated by 7% to P45.2 in end March 2010 from P48.3 a year earlier. In 2005, a US dollar was worth P53. Since then the peso has been appreciating, except in 2009 when the global economy entered into a crisis. By November 2009, the peso has resumed its appreciation trend.
Abola said that one way to effectively manage the country's burgeoning international reserves is to use these to buyback the country's debts or finance development projects. Better yet, allow the cost of borrowing to decline to make the country less attractive to hot money.
The cost of borrowing in the Philippines is more than twice that in other countries. Bank lending rates in the country averages 9%, while that in other countries range from one to five percent. While the country's lending rates are quite high, the savings deposit rates are only earning at two percent.
To stabilize international capital flows and stem the appreciation of their currencies, Dr. Abola cited that other countries impose tax on foreign capital or set restrictions on profit repatriation.
These countries are mindful of the impact of these international capital flows on the exchange rate, which dents on the competitiveness and development of the tradable sector, Abola noted. -- Ritchelle Alburo, PHILEXPORT News and Features<--back
2. Exports from developing countries to grow 11 percent in 2010
Exports from developing countries like the Philippines and the Commonwealth of Independent States are projected to expand 11 percent in 2010, but it would take another year of growth at this pace for trade volumes to surpass the peak level of 2008.
That of developed economies would only rise 7.5 percent while world trade is set to rebound in 2010 by growing 9.5 percent after the 12.2-percent drop last year.
But it would require three years of growth for developed countries to bring about a return to pre-crisis levels.
These growth estimates were made by the World Trade Organization (WTO) Secretariat published by the International Trade Center (ITC) in its April 2010 business trade policy briefing issue.
World trade and output are currently in a recovery phase,it noted. Without any further upheavals in the global economy, world merchandise trade should resume its normal upward trajectory through the end of 2010, although some deviation from its previous trend line will persist indefinitely.
These projections took into consideration a resumption of global gross domestic product (GDP) growth in line with consensus estimates of 2.9 percent at market exchange rates, as well as stability in oil prices and exchange rates.
Unexpectedly positive or negative economic news in the coming months could, however, necessitate a revision of the trade forecast, it said.
According to business briefing, these trade forecasts are more sensitive to changes in outcomes for developed countries than for developing ones due to the formers-larger share of world trade.
It said various factors could pose significant risks to the growth forecasts, including the possibility of further increases in oil prices, appreciation or depreciation of major currencies and additional adverse developments in financial markets.
However, there is a possibility that trade may grow higher than forecast like if unemployment falls more quickly than expected in developed countries, it added.
In 2009, volume of world trade contracted by 12.2 percent - the largest such decline since World War II - due to the impact of the global financial crisis.
Despite this, trade-restricting measures applied by WTO members in response to the crisis have actually declined in recent months.
However, significant slack remains in the global economy, and unemployment is likely to remain high throughout 2010 in many countries. Persistent unemployment may intensify protectionist pressures,the business briefing further said. -- Danielle Venz, PHILEXPORT News and Features <--back
3. DTI asked to abandon plan to divert ESF to El Nino calamity fund
Exporters based in Central Visayas Region have appealed to the Department of Trade and Industry (DTI) to abandon its proposal to the Office of Budget and Management to divert the undrawn balance of the P1-billion Export Support Fund (ESF) to the El Nino calamity fund amid improving exports outlook.
In a position paper, the Confederation of Philippine Exporters Foundation (Cebu) Inc, the umbrella organization of PHILEXPORT Cebu, said exporting industries still need the roughly P989 million undrawn balance of the ESF.
The export sector, outside the economic zones, has not yet fully recovered from the effects of the global financial crisis,it stressed.
It added that exporters likewise need some nurturing and all-out support in order for them to remain competitive should the global recovery filter down to the small and medium business sectors.
Even if signs of a market recovery in the US and elsewhere are emerging, the group pointed out that prominent economists have cautioned the market players about the sustainability of the recovery and advised investor prudence.
In the Central Visayas alone, there were more than 40 small and medium enterprises (SMEs) which either shut down or have suspended operations, as average sales dropped by at least 50 percent per company.
Industry sector associations also estimate that the crisis may have caused the layoff of more than 150,000 workers in the region mainly in the subcontracting supply and value chains.
Although there is concrete proof that companies are rehiring workers, many of these workers are actually hired on short-term contracts as orders from foreign buyers are also booked on short-term basis,according to the position paper.
The ESF was established last year in the midst of the global economic crisis to help exporting firms promote their products and build capacity for them to remain competitive in the global markets that have declined considerably.
The entire export sector reeled from cancelled orders and bleak prospects ahead resulting from the collapse of the US financial system that led to the global crisis in late 2008.
Of the pledged P1 billion, a measly P11.6 million was actually released, bulk of the amount was spent for trade promotion activities.
In order for other exporters benefit the undrawn balance of the fund, the group also asked the Export Development Council (EDC) to fast track the evaluation and processing of meritorious project proposals. -- Danielle Venz, PHILEXPORT News and Features <--back
4. BPO stakeholders start development of top next wave cities
Stakeholders of the business process outsourcing (BPO) industry will start developing the industry's growth in 10 key cities identified as investment areas for outsourcing firms.
This came after Baguio and Dumaguete were added in the list of top next wave cities this year. Metro Clark, an established information technology-BPO location, joined the ranks of Metro Manila and Metro Cebu, while Bulacan East and West were consolidated into Malolos area.
Davao City topped the list, followed by Sta. Rosa, Bacolod, Iloilo, Metro Cavite, Lipa, Cagayan de Oro and Malolos.
Business Processing Association of the Philippines (BPAP) chief executive officer Oscar Sañez said the next wave cities program provides a great avenue for local empowerment.
What we have done (assessment of cities) through the scorecard is just a starting point. Part of the work is related to empowering the city themselves under the cybercorridor of the government; empowering them and enabling them to be able to do the work we have done in the central location here in Manila,he said.
Sañez said a public-private partnership is crucial in promoting and accelerating the development of next wave cities.
He said the program also involves establishing the ICT councils and partnerships with the property developers, the local government units (LGUs), the Department of Education and even the local vendors and suppliers for the industry.
Sañez, also the PHILEXPORT trustee for the IT services sector, said that by having a multi-sectoral body in each of these cities own ICT development in their locality, cities are able to redefine themselves and create fresh business opportunities, which drive new commercial activities resulting in wealth and added value to the local economy.
He said this also ensures that their places would be BPO-ready and business environment could sustain the growth of the industry.
For his part, Commission on Information Communication Technology (CICT) Secretary Ray Anthony Roxas-Chua III said the development of next wave cities also expands IT-BPO hiring pool and offers low-cost alternatives to IT-BPO operators.
BPAP data showed that employment created by top next wave cities in 2009 grew by a whopping 148 percent compared to 2007's. This was much higher compared to National Capital Region (NCR)'s 42 percent and outside NCR's 70 percent.
Criteria in the selection of this year's next wave cities include the availability of talents carrying the largest weight of 40 percent in the overall ranking; followed by infrastructure, 30 percent; business environment, 20 percent; and cost, 10 percent. -- Danielle Venz, PHILEXPORT News and Features <--back
5. PPP key to harnessing opportunities in RP's sunrise industries
Public-private partnership (PPP) would serve as an institutional solution to the inability of the government to harness the full potential of the countrys sunrise industries like tourism.
Having cited the ill-developed physical and soft infrastructure of the country, Special Envoy to China Ambassador Jose E.B. Antonio intimated that the government should enter into more Build-Operate-Transfer (BOT) infrastructure projects crucial for the continued development of tourism and other sunrise industries.
That the Philippines only lured in about 4.8% of the total tourists visiting the ASEAN countries is not surprising given its poor transport system, said Amb. Antonio.
He likewise stressed that before we map out grand plans to be a key tourist destination in Asia, the government should first put in place the basic tourism infrastructure and services such as world class hotels, uninterrupted supply of electricity and water and quality telecommunication services, among others.
It is imperative that the Philippines build more airports and rehabilitate and expand the existing ones to bring in more tourists from different parts of the world and there must be more direct international flights to key tourist destinations in the country, Amb. Antonio pointed out.
Amb. Antonio who is also Chairman of Century Properties, noted that having direct international flights is important as shown by the case of Phuket, Thailand, which used to be just like Davao but is now a tourist magnet.
Sad to say, many of the country's tourist destinations do not even have the necessary public transport system, energy and water infrastructure, Amb. Antonio lamented.
With the government obviously in dearth of funds and technical competence to build the critical infrastructure projects, Amb. Antonio noted that it will be advantageous to enter into more public-private partnerships.
Of the 65.7 million tourists who visited the ASEAN region in 2008, about 3.1 million went to Philippines compared to 22 million for Malaysia, 14 million for Thailand, 10 million for Singapore, 6 million for Indonesia, and 4 million for Vietnam.
The Tourism industry's contribution to the country's foreign income stood at around $4 billion. The export sector contributed $38 billion worth of foreign exchange earnings, while OFWs generated $17 billion in 2009. -- Ritchelle Alburo, PHILEXPORT News and Features <--back
6. WB study confirms sharp decline in trade financing during the global crisis
Small and medium-sized export enterprises in the Philippines were hit hardest by the decline in trade financing during the 1008-2009 global crisis.
This was one of the salient findings in a study made by the World Bank of 14 developing countries across the globe, including the Philippines, as the international lender seeks for ways of helping revive trade financing worldwide.
A total of 425 exporting firms and 78 banks were surveyed.
In the case of the Philippines, the small exporters lost their credit lines as demand for their products sharply declined and no orders came, reported Dr. Victor Abola, head of the research team that conducted the survey here.
Their cash flow were affected as orders got cancelled, payments for delivered orders delayed and the local banks became risk-averse, meaning they turned more selective in giving out loans.
The most important government rescue package, Dr. Abola said, was the expansion of the Bangko Sentral ng Pilipinas(BSP) rediscounting window.
Congress also passed the amended Magna Carta for Micro, Small and Medium Enterprises (MSMEs). Under the amended law, private and state banks will now be required to allocate at least 10 percent of the loanable funds to MSMEs.
Abola said that the study was commissioned by the World Bank for it to find ways of helping revive the access of exporters to financing.
He found the guarantee fund of the Philippine Export and Import Bank (PHILEXIM) amounting to only P13 billion inadequate to cover the insurance of export goods during the crisis. Besides, the cost of insurance was also found by many exporters to be too expensive.
This was also too little, given the fact that monthly export shipment averages $3.5 billion, $1.5 billion of which is handled by SMEs that need short-term trade financing.
The economic professor, who heads the strategic research arm of the University of Asia and the Pacific, said in an interview that he will recommend to the WB that the multilateral lending agency funnels its assistance to the PHILEXIM and the Small Business Corp.
These two state-owned lending institutions specialize in financing small and medium enterprises. -- Abe P. Belena, PHILEXPORT News and Features <--back
7. Only three trade pacts signed by RP are in operation
Although the Philippines has signed several free trade agreements in the Asian region, only three of these have been put on operation and could be taken advantage of.
In the multi-lateral front, exporters and importers may now enjoy lower tariff rates under the ASEAN-Korea free trade agreement and the ASEAN-China free trade pact according to Assistant Secretary Ramon Kabigting, one of the country's trade negotiators.
The ASEAN-Japan Comprehensive Economic Partnership (AJCEP) of which the Philippines is a signatory, is yet to take off as this will require either a ratification by the Philippine Senate or an executive order by the incumbent President. For this reason, no certificate of origin form is still available for exporters to enjoy the tariff concessions under this treaty.
The rumor that the trade pact between ASEAN and Japan is under renegotiation is not true,Kabigting said.
Because of the delay, Filipino exporters to Japan were advised to use the bilateral trade pact between the Philippines and Japan, the Japan-Philippines Economic Cooperation Agreement (JPEPA) in their trade with that country. The only one-on-one free trade pact the Philippines has so far entered took effect last year.
The forms that entitle exports to enjoy almost zero tariff under JPEPA are now available at the export documentation centers of the Bureau of Customs nationwide.
Meanwhile, the same legal procedures are yet to be perfected covering similar trade pacts ASEAN has inked recently with India, Australia and New Zealand, the trade official clarified. -- Abe P. Belena, PHILEXPORT News and Features <--back
8. Crisis constrains trade finance for exporters, importers
The lingering global financial crisis has constrained trade finance for exporters and importers in developing countries, including the Philippines, in 2008 and early 2009, a World Bank (WB) survey indicated.
The survey on trade and trade finance developments was conducted during the first quarter of 2009 among 425 firms and 78 banks in 14 developing countries across five regions which also include Indonesia in East Asia; Turkey and Ukraine in Europe and Central Asia; Brazil, Chile and Peru in Latin America; Egypt and Tunisia in Middle East and North America; India in South Asia; and Ghana, Kenya, Sierra Leone and South Africa in Sub Saharan Africa.
The WB study Phase 1 found that the impact varied by the firm size, sectoral activity and countriesintegration into the global economy.
At the firm level, firms that rely to a large extent on the banking system for trade finance have suffered from more risk averse and selective local banks. On the contrary, firms that mostly rely on inter-firm financing and self-financing have been mostly affected by the slowing global economy, the lack and cancellation of orders, delays in buyerspayments, and shorter maturity imposed by suppliers,it said.
The small and medium enterprises (SMEs) were affected most by high increases in the cost of trade finance instruments.
A number of these firms operating in global supply chains and/or in sectors that have been most affected by the slow global economy have reported as being constrained both through the banking system and the drop in export revenues and buyers' liquidity.
"...Drop in demand has emerged as the top concern of firms. The lack of export revenues was putting pressure on firmscash flow and, therefore, their capacity to fund their export and import transactions," the WB stressed.
Study results also revealed that banks made lending standards and guarantee requirements more stringent for exporters.
To improve exporters and importers' access to trade finance and ease trade finance costs, governments and central banks of surveyed countries implemented various actions during the crisis.
For one, it cited the Bangko Sentral ng Pilipinas expansion of its rediscount window to raise loans for banks; increasing the value of loans to rediscounted loan papers; lowering interest rates charged on rediscounting; and setting at below-market rates or 0.5 percent below the reverse repurchase agreement rate.
The Philippine government passed an amendment to the Magna Carta for SME Law requiring banks to allocate up to 10 percent of their loan portfolio for SMEs.
It also planned to provide the P1-billion Export Support Fund meant to help exporters cope with the impact of the financial crisis.
For its part, the WB's International Finance Corporation's Global Trade Finance Program provided guarantee coverage in excess of $2.9 billion. It added 25 new banks to a total of over 180 issuing banks in 76 countries.
Trade financing gap was expected to persist this year as pickup in exports would raise demand for trade credit, but access to trade credit will improve at a slow rate due to banks' balance sheet problems and weak credit growth in the economy.
Exporters in developing countries would still face tight credit as banks are more reluctant to lend and the trade finance markets are shallower.
To this end, the WB is conducting another survey on the trade finance situation for exporters, importers and banks.
The Phase 2 of the Bank's study aims to determine if trade finance's price and scarcity have improved from crisis peak in 2008, whether trade finance constraints are still affecting trade of developing countries, and the effectiveness of the measures taken by governments and international governments in addressing trade finance constraints. -- Danielle Venz, PHILEXPORT News and Features <--back
9. Garments, furniture and refined copper are yet to recover
Electronics is leading the way in the spectacular recovery of Philippine exports followed closely by food products bannered by coconut oil and fresh bananas.
But the same could not be said for woodcraft and furniture, one of the country's top exports which remained in the ranks of strugglers, posting a three percent decline last February compared to the same month in equally sluggish market the same month last year.
Among the losers in the second month of this year were garments, the Philippines' second largest export, which showed a 13.3 percent retreat amidst a recovering global economy.
The biggest loser however were cathodes made of refined copper which declined by 24.8 percent, year-on-year.
Mineral products including gold, copper and nickel, are yet to recover as total exports in February, according to the latest report of the National Statistics Office, posted a negative 10 percent growth.
All agro-based products already showed evidence of recovering with a 33.2 percent growth on the back of a $139.43 million in export sales last February. -- Abe P. Belena, PHILEXPORT News and Features <--back
