At the height of the crisis, Malacanang picked the bill by allocating P1 billion grant form the Office of the President which expanded the activities to be covered to include the setting up of common service facilities and other developmental projects like the furniture design center of Cebu.

A third quick win, Ortiz-Luis further suggested, is the immediate review of the mandate of the Bangko Sentral ng Pilipinas (BSP) to make the exchange rate policy a weapon in speeding up and sustaining economic growth and development, not just a tool at reining in inflation.

In this period of recovery, the margins of exporters are fast getting eroded by a strengthening peso against the US dollar. -- Abe P. Belena, PHILEXPORT News and Features <--back

2. Garments, food, copper and furniture join the winners in the spectacular export rebound last March

The spectacular 43.7 percent export growth in the month of March was not only propelled by the quick recovery of the nation's top export product, electronics, but also pushed by the return of copper, food, furniture and garments in the list of major export goods on the road to recovery.

Garments which make up 3.5 percent of total exports and only second to electronics as the country top export, hauled in $146.07 million in March, an 8.5 percent jump from $134.63 million in sales in the same month last year.

It was the first time that exported clothing materials moved to positive territory after 17 successive months of negative growth.

Sixth biggest export, furniture and woodcraft product lines, also moved from its below zero growth for over a year to a growth rate of 9.9 percent in March on the back of $97.94 million. It was not yet a full recovery for furniture which posted over $100 million in monthly sales during the pre-crisis year of 2007.

Following the general trend were copper concentrates which gained by a whopping 273.7 percent and coconut oil, kicking up by 147.1 percent.

Food products except fresh pineapple and bananas, joined the rebounding segments of the export industry. For the first time since the pre-crisis years, agri-based products making up 5.4 percent of the total export revenue last March, posted a hefty growth of 49.7 percent on the strength of $225.83 million in export sales, the latest data released by the National Statistics Office had shown.

The rebound in over-all exports during the month on review also saw the re-emergence of the United States as the biggest single buyer of Philippine goods, absorbing 16.8 percent of all shipments.

But the trend which started in the year 2000 of more and more Philippine products finding their way to neighboring countries in East Asia was further reinforced by March export figures.

In all, Philippine exports to East Asia which includes China, Hongkong, Japan, Macau, Mongolia, North and South Korea and Taiwan continued to expand by 41.2 percent with purchases totaling $1.202 billion. This represented 43.3 percent of all Philippine exports in March.

Exports to ASEAN member-countries pole-vaulted by 91 percent on sales of $700.77 million from only $366.85 in March of 2009. -- Abe P. Belena, PHILEXPORT News and Features <--back

3. Generally peacefully elections seen boosting furniture exports growth

Furniture exporters expect slight revenue increase of five to 10 percent this year and another 10 to 15 percent in 2011 amid generally peaceful elections and as industry players exploit more robust markets abroad.

This optimism was expressed by Emmanuel P. Padiernos, vice president for market development of Chamber of Furniture Industries of the Philippines (CFIP), in the light of the 9.4-percent rise in the country’s furniture exports to $240.3 million in 2009 from $219.6 million the previous year.

“With the positive effect of last election (generally peaceful, new leaders and better image of the country), buyers will be more comfortable to come to Philippine island to replenish their much-needed stocks,” he said.

Padiernos said the growth of the sector would also be buoyed by furniture industries’ efforts to expand market in the region.

“Although a lot of our members are still apprehensive of China copying our products, we are considering penetrating the China market aside from India, Australia and of course the ASEAN,” he noted.

Padiernos said aggressive market promotion is thus crucial to attain this and next year’s revenue goals.

Moreover, he said the continued recovery of traditional markets such as the United States and Europe, albeit at slower pace, could boost industry growth. The upturn of these markets helped furniture exporters achieve 9.4-percent growth in 2009, he added.

But despite this, Philippine furniture exports average growth rate for the period 2005 to 2009 is still minus 5.3 percent, according to Benjamin Chiu, market analyst of iSEARCH Philippine Exporters Confederation, Inc. Cebu, citing International Trade Centre Trademap data.

“During the period 2005 to 2008, furniture exports in most major markets abroad were noted to be erratic but generally on declining trend,” stressed Chiu. “However, in 2009, most of these markets reported double-digit growths except for the United States and United Kingdom which still experienced negative growths.”

He also identified robust markets for the country’s exports, including China, Canada and Belgium.

Average yearly growth rates of furniture exports to these countries averaged at 101 percent for China, 51 percent for Canada and 20 percent for Belgium for the period 2005 to 2009.

“It is expected that Philippine furniture exports to these countries will increase partly because of the current trend and that the global economy started to recover,” Chiu further said. -- Danielle Venz, PHILEXPORT News and Features <--back

4. Handicraft makers hopeful expo can boost RP exports to China

Handicraft makers are optimistic that the higher-than-projected sales they generated from May 1-12 in the ongoing Shanghai World Expo 2010 could pave the way for the country's increased share in the China market.

Salvio Valenzuela Jr., executive director of the Philippine Chamber of Handicraft Industries Inc. (PCHI), said 50 to 80 suppliers of handicraft products participating in the six-month exposition until October 31 already incurred sales 20 percent higher than projected during the first 12 days.

Valenzuela said Chinese buyers go for the country’s gift shop items made of indigenous raw materials like capiz and abaca fiber.

“Although sales are lower against the expected global sales, this could be a good indicator of Chinese consumers’ acceptance of Philippine products. Through the six-month expo we are participating together with DTI (Department of Trade and Industry) and CITEM (Center for International Trade Expositions and Missions), we hope to increase our share in China market,” he noted.

Valenzuela said they look forward to starting collaboration with global importers based in China.

“We are hoping they would notice the uniqueness of our products,” he stressed.

Valenzuela said local participants, mostly small companies supplying novelty items, occupy a 2,000-square-meter Philippine pavilion in the exposition.

PCHI members offering handicrafts, home decors, gifts and premiums and basketware products, utilize a 78-square-meter space, he said.

The exposition website described the exhibition area as epitome of the Philippines, where visitors can enjoy unique local conditions, customs and art performances inside the pavilion.

Valenzuela said organizers expect to attract 70 million visitors from around the world in the Shanghai expo.

The major trade and economic exposition is held every four years. Japan and Zaragoza, Spain played hosts to the last two events, he added. -- Danielle Venz, PHILEXPORT News and Features <--back

5. Launching of national quality seal program slated this October

The Philippines will launch this October the national quality seal (NQS) program for agricultural and fishery products meant to further promote market access of quality and safe products produced in the country.

Lara Vivas, senior science research specialist of the Department of Agriculture’s Bureau of Agriculture and Fisheries Product Standards (BAFPS), said the launching will coincide with the Agri Link show.

Vivas said four companies were already allowed to use the quality seal, including Del Monte Philippines which was certified according to Good Agricultural Practices (GAP), Royce Food Products, Celebes Oil Mill and Celebes Agricultural Corp. which were organic-certified.

She said the NQS could serve as marketing tool to boost Philippine exports.

According to the BAFPS, which has been tasked to lead in the implementation of the NQS, firms or farms certified according to food safety and quality assurance systems either GAP, Good Aquaculture Practices (GAqP) or Hazard Analysis Critical Control Point (HACCP) depending on the commodity products, will be allowed to use the quality seal.

BAFPS director Gilberto Layese earlier encouraged companies to apply for NQS that certifies products are hygienically produced and meet standards.

He said fees pertaining to the filing of application forms are free, except for the cost of seal stamped on high quality products.

The seal can also be used hand in hand with other certification schemes, he added.

Moreover, Layese said Thailand, Malaysia, Ireland and China are already adopting the practice of stamping quality seals on agricultural products. -- Danielle Venz, PHILEXPORT News and Features <--back

6. BSP encourages exporters to hedge transactions

The BSP is encouraging exporters and other corporations and individuals with foreign exchange-denominated assets to hedge their transactions against foreign currency risks.

The BSP told exporters to make use of the hedging instruments offered by banks so as to cope with the adverse effects of an appreciating peso as it vows to let the market dictate the value of the peso against dollar.

As set out in Circular No. 594, the BSP aims to promote the use of hedging instruments by setting risk management guidelines to ensure that banks have the capacity and ability to manage risks arising from engaging in derivatives activities said Annaliza G. Tan-Cimafranca, Head of BSP's Capital Markets Specialist Group Supervision and Examination Sector.

Said circular also prescribes banks to inform their clients of the nature of the transaction and to ensure that such transaction meets the clients' objectives and risk tolerance.

Outstanding derivatives such as option and forward contracts significantly rose to over USD60 billion in 2009 from less than USD20 billion in 2001.

Rolando Bautista, Senior Vice President for Corporate Sales of Hong Kong and Shanghai Banking Corporation (HSBC) advised exporters to use non-deliverable forward (NDF) contract for transactions where cash flows are uncertain.

Bautista said that with the NDF there is no principal exchange of dollar versus the peso, thus providing exporters cash flow flexibility. The settlement will be just the net peso difference between the fixed forward rate and the spot rate at maturity date, multiplied by the agreed principal amount, he said.

With the forward rate set at P41/USD1 and the peso appreciates to P39/USD1 during the maturity date indicated in the forward contract, the bank shall pay the exporter P200,000 or the difference between the fixed forward rate against the spot rate of P39/USD1, multiplied by the USD100,000 that the exporter agreed to sell one year forward.

Of course if the peso depreciates, then it will be the exporter paying the bank by the difference in the forward and spot rates.

For other transactions, Bautista likewise recommended the use of both forward and option contracts.

As detailed by Bautista, the option has the potential for limited losses and unlimited gains. The losses are reined in as the cost to exporters for protecting themselves against wide swings in the FX market is only the option premium. The gains however can be unlimited, as the exporters are given the option not to exercise the transaction if market movement goes against it.

The option is a financial derivatives contract that provides the right, but not the obligation, to buy (call option) or sell (put option) foreign currency, for a fee or premium, at a specified exchange rate on agreed future date.

As helpful as these hedging instruments appear to be, small-and medium-sized exporters are not keen on entering into these seemingly complex transactions. -- Ritchelle Alburo, PHILEXPORT News and Features <--back

7. Price stability remains BSP’s key policy thrust

Noting the upside risks to inflation, the Bangko Sentral ng Pilipinas (BSP) revealed that its monetary policy thrust will be geared towards ensuring price stability.

According to Assistant Governor Ma. Almasara Cyd Tuano-Amador, the BSP will keep a close watch over price developments to rein in inflationary pressures.

Amador detailed that the adverse effects of El Nino on agricultural production, tight power supply conditions, and possible increases in transport and wages pose upside risks to inflation.

The BSP is also monitoring the capital inflow surge which could stoke inflationary pressure if it is primarily used to finance consumption rather than productive investments.

Countering these upside risks to inflation is the sustained appreciation of the peso. Deputy Governor Diwa Guinigundo said the BSP expects the peso to hover around P45-47 against the dollar given the continued resilience of workers’ remittances and the strong performance of business process outsourcing (BPO).

With price stability being the BSP’s key policy thrust, Romeo Bernardo, former Chairman of the Philippine Stock Index Fund, said that exchange rate will have to be determined by the market.

With free movement of international capital, the BSP will have to let the market determine the exchange rates if it were to pursue price stability, he said.

That is to say, the BSP cannot target both inflation and exchange rates. As Deputy Governor Guinigundo disclosed, inflation targeting has been the BSP's monetary policy framework since 2002.

Under the inflation targeting framework, the BSP will have to raise interest rates if the inflation rate exceeds the target level. Such monetary policy framework creates a bias towards a strong currency.

Exporters, overseas Filipino workers (OFWs) and other sectors that are competing against cheap imports have been asking the BSP to stem the continued strengthening of the peso.

With inflation-targeting as its monetary policy framework, however, it came as no surprise that the BSP was inclined to underscore the importance of efficiency-enhancing measures via expansionary fiscal policy measures to help arrest the declining competitiveness of various sectors.

Amador noted that price stability is not an end in itself but a means to achieve inclusive growth. It is a necessary but not a sufficient precondition to inclusive and transformational growth, she added.

The BSP will help achieve inclusive growth through financial learning and easier access to credit, Amador said. -- Ritchelle Alburo, PHILEXPORT News and Features <--back