Thursday, October 02, 2008 ‘Take risks amid economic crisis’
CUT the fat. Find new markets. Compete.
Small and medium business owners eager to beat the fallout from the US financial crisis need these strategies, for starters.
“Businesses as a whole will try to be more careful with their investments. Right now, many of the big companies are adopting a wait-and-see attitude, because we don’t know what might happen next,” said Robert Go, a former president of the Cebu Chamber of Commerce and Industry.
The US Con-gress’ rejection this week of a $700-billion bailout triggered what the Associated Press described as “the largest sell-off on Wall Street since the day after the Sept. 11, 2001 terror attacks.”
The jitters are most obvious in the financial sector.
“Banks, insurance firms, private banking, offshore banking, and lending companies would definitely be hit,” said Go.
But if the crisis spreads and jobs are lost, weak consumer spending in the US will hurt developing countries, like the Philippines, that count on the superpower to buy the bulk of their exports or directly provide jobs.
“There would be fewer jobs available in the US, so money sent into the country (by overseas Filipino workers) would also be less,” said Go.
Warning signs
Signs of trouble appeared long before financial giants like Lehman Brothers Holdings and American International Group hit the skids this year.
Since 2007 began, exporters in Cebu have observed a “very significant decrease”—about 6 to 12 percent—in the volume of orders from US buyers, said executive director Fred Escalona of the Confederation of Philippine Exporters (Philexport) in Cebu.
Philexport’s member-companies were told as early as 2007 to “diversify markets” to cope with sluggish demand from their traditional markets, Japan and the United States.
This is why, Escalona added, Philexport worked with the Center for the Promotion of Imports from Developing Countries to learn about the different entry requirements
and customer characteristics in the European Union.
“It is not so easy to retool,” said Escalona, but exporters stand a better chance of surviving the turmoil if they “develop a new market strategy” and make their operations more efficient.
“If before exporters could afford to make 100 prototypes yet sell only 10, now we must try to develop only 20 prototypes, but sell 10, if not more,” he told Sun.Star Cebu
in a phone interview.
Garments
The local garments industry is familiar with economic turmoil in the United States, and they have long shifted their sights on the European market.
This is why, for local garment manufacturers, “hope has not entirely dimmed,” said Minerva Yuviengco, president of the Cebu Garment Industry Association (CGIA).
But they cannot deny the effects of the US economic crisis, she added. The Department of Trade and Industry (DTI), in fact, called the Philippine garments scene a “sunset industry.”
Some local garment manufacturers listed zero exports this year, and many in the country have closed in the last five years, according to Yuviengco. This came when they lost the US market to China, which offers cheaper labor.
So now, they want to cater to Europe, but they face an altogether different landscape. The European market is high-end, and local sewers aren’t exactly ready for that.
“If you go high-end, you need really, really skilled tailors and dressmakers who can make a full outfit,” Yuviengco explained.
At the Mactan Export Processing Zone, where garment parts are manufactured for bulk orders from countries like Japan, skills are “specialized.”
This means that when a worker sews a sleeve, she sews a sleeve. At the end of her five-month contract, she has perfected the craft of sewing a sleeve, but not the
entire outfit.
Going high-end for the European target, on the other hand, requires skill and expertise at market research, product development and, of course, sewing.
And while this generation is fashion-savvy, not much interest abounds in the process of making clothes.
Yuviengco added that local schools and government training provide sewing classes. But the curriculum that really paves way for talented sewers who can come up with
an entire outfit can only be found in some Manila schools, which only the rich can afford.
The Center for the Development of Imports from Developing Countries has been training workers in the garment industry, through opportunities in Netherlands, where
goods bound for Europe pass through.
This open door, though it requires hard work, training and government support, has assured CGIA that the local garments industry, albeit “dying”, will withstand the US economic turmoil.
Real estate
Meanwhile, the local real estate scene is just as hopeful, but the US financial meltdown has brought about an ironic twist.
Foreign buyers, according to Cebu Realtors’ Board (Cereb) past president Virginia Locson, are now eyeing American lots, making the US a competitor instead of a client zone.
The falling price of US land has made several buyers rethink their options.
Locson narrated that only recently, a client who wanted to buy land in which to build a call center called her up and asked for more time to make a decision.
“Since land prices there (in the US) are so low, he said that he might as well buy there,” Locson said. “It’s a buyer’s market there now.”
However, this option is only for the moneyed few, and only for foreign investors.
Locson said the bulk—about 60 percent—of local realtors’ buyers are overseas Filipino workers (OFWs). And OFWs, she added, will always choose to buy lots in their homeland.
“It’s tradition. When we retire, the Philippines is still the best place to stay,” Locson said.
As long as realtors keep targeting Filipinos abroad, the local realty industry has a good chance of withstanding whatever blow the US economic crisis will have on the Philippines.
After all, most of these OFWs are “not directly” affected by the meltdown, according to Locson.
They don’t work in banks or investments. Many work in ships or in the Middle East.
She added that the real estate business can continue thriving if companies also appeal to the yuppies who buy condominium units and to mid-market Filipino families who want their own house-and-lot.
Other Asians, especially Koreans, also contribute to the real estate boom in Cebu, Locson pointed out.
“Asian countries are being cautious, but we will withstand the domino effect. Asia will survive. We’ve already been through our own crisis,” she added, referring to the financial crisis that started in 1997. (With IDA)
