Welcome to Philippine Exporters Confederation, Inc.

September 18, 2009

1. RP loses $10B in export earnings

Foregone dollar earnings for the first seven months of this year have hit $10 billion, as most of the country’s major markets continued their slow demand, July export data released by the National Statistics Office (NSO) had shown.

In the seven-month period, the biggest loser was the electronics industry, shedding $17 billion with sales of only $11.67 billion against $17.69 billion from January to July last year or a decline of 34.04 percent.

All but three of the country’s 30 major export goods have dived to below zero growth. The most resilient were pineapple, tuna and jewelry which still managed to post one digit growths over the first seven months of the year.

But for the month of July, even tuna got a beating, retreating by 16.3 percent with export revenues of $34.80 billion. Bananas, on the other hand, was the month’s top gainer on $41.56 million export sales which was 25.5 percent higher than its record on the same month last year.

For the whole seven months, however, banana exports went negative at minus 1.83 percent growth.

The July data also dashed hopes that the whole industry is on the road to recovery. Compared to the previous month of June, total dollar earnings in July went down by 24. 8 percent on total revenues of $3.31 billion against $3.40 billion.

All major markets ordered lesser goods during the month in review. Top buyer remained the United States including Alaska and Hawaii but the decline in exports to that country now suffering from a lingering economic recession stayed at 17.5 percent on purchases of $583.75 million.

The retreat in sales to Japan, our second biggest market, was even deeper at 21.3 percent from $550.19 million in revenues, much less than the $698.73 million sales in July of 2008.

Third largest market, the Netherlands, ordered 12.1 percent less from the Philippines in buying $301.15 million worth of goods against $342.58 million in the same month last year.

Hong Kong bound goods fetched in $259.63 million, representing a slid of 9.1 percent below the $429.34 million in July 2008. Even China, despite it keeping a high growth rate in defiance of the global decline, bought less than half of the goods it bought from the Philippines in July 2008.

Exports to China went down to $226.92 million which was much lower than imports from the country worth $500.55 million in the same month in 2008. The drop in exports to Eastern Asia made up of China, Hong Kong, Japan, Macau, Mongolia, Korea and Taiwan was 37.37 percent while those to members of the Association of Southeast Asian Nations (ASEAN) economic bloc nosedived by 32.7 percent. -- Abe P. Belena, PHILEXPORT News and Features <--back

2. Small food exporters to the US fear extinction due to new law

If the present export sales crisis will not yet wipe out the small and medium food exporters in the Philippines, they face that fate next year if they fail to comply with a very strict food safety law that the United States is set to implement by January next year.

This was the grim conclusion shared by the Philippine Food Processors and Exporters Organization (PHILFOODEX) and the Integrated Food Manufacturers of the Philippines (INFOMAP) on the level of adjustments the local food sector has reached in compliance with HR 2749 or the US Food Safety and Enhancement Act of 2009. The bill is expected to be passed by the US Congress andn approved by President Obama within the year.

Their fears were aired by PHILFOODEX president Roberto Amores and INFOMAP head Marilou Florendo in a meeting with government officials trying to help food exporters to the US comply with the food safety law.

At the minimum, the law requires all food exporters to the US to develop and implement a food safety plan as a way to protect American consumers.

For this purpose, food exports were divided into high- and low-risk. On top of the high-risk list are marine-based products.

In their assessment, the responding government agencies led by the Department of Trade and Industry (DTI) believed that the marine sector is in the best position to comply with the new law because since 2005, they have already been required to comply with US and European food safety requirements.

The biggest of these exporters should already be compliant with the Hazard Analysis Critical Control Point (HACCP), an international standard that can be used as food safety plan. Companies that are implementing HACCP even if they have not been certified to it are already compliant, according to the provisions of the bill.

The rest of the food industry that will be covered by the law starting next year are projected to face difficulties in complying, as they will need to make new investments in their plant facilities at a time when they are already incurring heavy losses due to shrinking orders.

The DTI is yet to confirm with the US Food and Drugs Administration (USFDA) if the annual $500 registration fee per facility applies to exporters in the Philippines or to importers in the United States.

In January, the USFDA had initially inspected some seafood-based export factories in different parts of the country from Zamboanga to Bulacan and are due to come again next year to inspect more plants, including those outside the fishery sector.

Another hurdle in the bill is the requirement for certification of compliant exports by accredited laboratories in the Philippines. At the moment one hope is for the Food Development Center (FDC) to invoke and expand its MOA with the FDA regarding testing and certification. The original document only covers fruit juices, shrimps and meat.

In the meeting, Amores and Florenda agreed to discuss how their associations can work together with the government agencies to address implementation issues. -- Abe P. Belena, PHILEXPORT News and Features <--back

3. Increase competitiveness, develop new markets, RP advised

The Philippines should urgently undertake efforts to become more competitive and develop other markets such as in Central and South America and Eastern Europe, in the light of China’s increased competitiveness in the global market.

This is among the recommendations of a 69-page research paper titled “Engaging the Dragon: RP-China Economic Relations” authored by Joseph H. Francia and Errol Ramos of the Fair Trade Alliance (FairTrade).

The paper noted that China offers a huge market for Philippine products and services that should be taken advantage of by the country.

However, the increasing competitiveness of China will also make it more difficult for the Philippines to continue to export to its traditional markets like the United States, Japan and the European Union.

“The economic opening of China to the world has been greatly advantageous for them so far,” it stressed. “US imports from China have been on a steady rise at the expense of Philippine imports and the rest of the ASEAN (Association of Southeast Asian Nations).”

China ranked third as the Philippine trading partner in 2003-2008 after US and Japan.

The country’s other major trade partners were Hong Kong and Netherlands. The country’s top exports to China during the six-year period were seven electronic products and three mineral products.

However, citing key indicators for Asia and Asia and the Pacific 2009 of the Asian Development Bank, the paper said five other ASEAN countries – Indonesia, Malaysia, Singapore, Thailand and Vietnam – have greater trade with China than the Philippines in 2008.

With this, Francia and Ramos said it is imperative for the Philippines to look for new markets and to find niches where it will have a comparative advantage.

They also underscored the need for the country to address the basic issue of competitiveness and capacity building.

This involves upgrading of infrastructure, improving governance and education and bringing down electricity costs.

“These are the more fundamental concerns that have to be immediately addressed by the government, in partnership with the private sector,” the paper stressed.

Francia and Ramos also pushed for the creation of a special unit with government agencies and private sector to improve the quality of trade as well as investment data and closely monitor Philippine-China trade and investment in specific sectors and products.

“In fact, this unit could be under the umbrella of the Philippine Trade Representative Office (PTRO) that FairTrade has been advocating for some years now,” they said.

They pointed out that the Department of Trade and Industry and the Department of Foreign Affairs both have commercial attaches and economic officers respectively in China and in the other ASEAN countries.

They should track the trade and investments of China with the Philippines and the other ASEAN countries in specific products and sectors, the paper said.

“In order for our economic managers to craft policies and strategies towards China and other ASEAN countries which can, accordingly, target these products and sectors rather than be general in approach, and hence less effective,” it added. -- Danielle Venz, PHILEXPORT News and Features <--back

4. New laboratory to facilitate compliance of fish exports

Philippine exports of fish and fishery products are expected to receive a further boost after government and an export group in Region XII have agreed to work together to ensure that the quality of these products meet the standards set by the European Union and other importing countries.

The memorandum of agreement (MOA) covering the arrangement was signed between Bureau of Fisheries and Aquatic Resources (BFAR) director Malcolm I. Sarmiento Jr. and PHILEXPORT XII chapter president Ismael O. Salih, Jr. last month.

Under the MOA, BFAR shall submit fish and fish product samples to the laboratory following a sampling protocol. Meanwhile, the PHILEXPORT chapter-run Quality Control Laboratory shall handle the chemical and microbiological analysis of the samples for a fee. This test is a prerequisite for BFAR to issue health certificates prior to shipment of these products.

“Both BFAR and PHILEXPORT XII have a common commitment to ease the problem of laboratory analysis of fish and fishery products for export to the EU and other countries,” they said.

The MOA signing was conducted just months after the PHILEXPORT’s testing facility received recognition from the BFAR last June.

Laboratory manager and PHILEXPORT Region XII Executive Director Ronnie Masicampo explained that BFAR’s recognition means that the laboratory results qualify as basis for the commodity clearance from BFAR XII.

“It strengthens our marketability since it confirms our competency and credibility in conducting laboratory analysis,” he noted.

Masicampo said the P5.3-million facility based in General Santos started operation last February as a third party food testing laboratory after passing the initial evaluation conducted by BFAR Manila office. The laboratory was one of the projects funded under the P280 million export promotion fund.

“The continuing influx of food samples from our existing clients and patronage of new clients over time proves that the laboratory had satisfied the demands of our clients,” he said.

Masicampo said the laboratory now serves an average of 12 clients per week, including two tuna canneries in General Santos City.

“The number of tests posted significant growth in June to August after we passed BFAR’s evaluation,” he noted.

PHILEXPORT’s facility brings to three the existing laboratory testing facilities in the region. The two others are the BFAR Regional Fish Health Laboratory and Dole Philippines Laboratory Services. -- Danielle Venz, PHILEXPORT News and Features <--back

5. Czech businessmen asked to invest in BPO, tourism

Czech investors are encouraged to pour in their money in the Philippine business process outsourcing (BPO), tourism, infrastructure, renewable energy and agribusiness sectors.

In a business meeting during the recent visit of Czech Republic Prime Minister H.E. Jan Fischer and his delegation here, Board of Investments (BOI) executive director Efren V. Leaño said the country is the third largest destination geography for BPO services.

This followed India and Canada after the local BPO sector generated revenues of $6 billion in 2008 based on the industry’s estimates.

Leaño said the country is an ideal BPO destination due mainly to its abundant labor force, English proficiency, affinity with Western culture and cost effectiveness.

He said there are also huge opportunities for investments in the tourism sector, particularly tourist accommodation facilities, retirement villages, medical tourism and healthcare and wellness products and services.

“There is a growing market for tourism activities (here),” he noted.

Leaño said Czech investors could also engage in more renewable energy projects.

“(The Philippines is the) second largest producer of geothermal energy in the world. (It) has abundant biomass resources with installed capacity expected to reach 161 megawatts by 2014,” he pointed out.

Likewise, Leaño said the country holds the largest potential of 76,000 MW for wind energy among the Southeast Asian nations.

The BOI official likewise urged them to set their sights on investing in Philippine infrastructure projects.

He identified these as transport – air, water and mass rail transport, water supply and/or distribution, logistics, energy, mass housing, physical infrastructure, pipeline projects for oil and gas and projects under the build-operate-transfer (BOT) Law.

Moreover, Leaño said the country’s agriculture and fishery also offers investment opportunities such as production and processing of agricultural and fishery products and biofuels.

He said attractive incentives are available for investors. These include income tax holiday (ITH), special five-percent tax rate on gross income after the lapse of ITH and tax and duty exemption on imported capital equipment for IT park and ecozone locators, and zero-percent duty on imported capital equipment, among others. -- Danielle Venz, PHILEXPORT News and Features <--back

6. Decline in July exports encourage exporters to tap local market

With Philippine exports plunging 25 percent in July from same month last year, exporters have turned their sights on the local market to keep afloat.

“It is hard to predict the trend of the global buying demand for the home furnishings industry at this point in time because of the absence of positive signals from our major markets,” said Executive Director Salvio Valenzuela, Jr., of the Philippine Chamber of Handicraft Industries Inc. (PCHI).

He added that “in response to a worsening export scenario, Philippine exporters are encouraged to tap the lucrative domestic market that is believed to be more stable than the overseas demand.”

“PCHI as a Business Support Organization (BSO) of home furnishings industry, is responding to this call by offering various platforms to promote export products in the domestic market,” he explained.

One platform is in the "Pamasko ni Kuya Part 7, Pre-Christmas Selling Bazaar of Best Filipino Products", which is slated on September 24 to 27, 2009 at the Megatrade Hall 2, SM Megamall, Mandaluyong City.

The event will showcase the best products that the Philippines offers to the world, including elegant furniture, handcrafted items, housewares, gift items, corporate giveaways, fashion accessories and home decorations.

Exporters are hoping that through participation in local trade fairs particularly this coming holiday season, they will be able to penetrate the vast local market and enable them to continue to sustain their operations, while the foreign market is still uncertain.

PCHI is organizing this event in collaboration with the Congressional Spouses Foundation Inc. (CSFI) and supported by the Market Encounter Goes to Manila (MEGMA) Foundation, Philippine Exporters Confederation, Inc. (PHILEXPORT), Department of Trade and Industry (DTI), Philippine Daily Inquirer and the PHILEXPORT Southern Tagalog Association Inc. (PHILSTAI). -- Maricel Mulawin, PHILEXPORT News and Features <--back