Exporters log ‘robust growth’

“I estimate total exports of $56.5 billion for 2014 or a nine percent increase over the last period,” said Fred Escalona, executive director of Philexport Cebu, the umbrella organization of Cebu-based exporters.

Electronics, the country’s biggest merchandise export, contributed highly to the growth. Other key contributors are the services sector, classified under reverse exports that posted a 10.6 percent growth over the first three quarters; and strong domestic consumption.

According to Escalona, high spending was recorded in the second quarter this year with large purchases in calamity-stricken areas and increased consumer confidence in the country’s major markets.

Winning sectors

Industry and services were the winning sectors this year, according to Department of Trade and Industry (DTI) 7 Director Asteria Caberte.

“Sub-sectors like the creative industries such as furniture, gifts, decors, and housewares, and even fashion accessories have improved compared to their performance in the past years. Industries which support the tourism sector also improved remarkably as the tourism sector improved,” she said.

Cebu’s furniture industry, one of the hardest hit export sector during the 2008 global recession, reported the return of orders from major markets.

Cebu Furniture Industries Foundation (CFIF) Inc. president Robert Booth said the sector is confident to hit five to six percent growth this year on the back of the improving economic situation in the United States, the country’s biggest export market for furniture.

Getting better

“The global economy is slowly getting better as shown by improvements in the US housing sector,” said Booth. “All we want to see is a continued improvement in the credit situation housing for the furniture sector to remain growing.”

The US is currently the top destination of Philippine furniture exports, with a 70 to

75 percent share.

Growth in Cebu’s Gift, Toys and Housewares (GTH) sector, meanwhile, was flat this year compared to 2013.

Incoming Cebu GTH president Venus Genson blamed it on the lack of access to finance and marketing initiatives as well as programs that are not properly communicated to the sector.

Despite these factors, outgoing president Pete Delantar said the sector had some luck as manufacturers tapped the local market, particularly the growing tourism market as well as the interior decoration sector, which got a boost from the expanding real estate sector in the province.

“These markets have offset some lost revenues in the export market,” said Delantar.

“The export manufacturers who were quick to exploit the domestic market enjoyed high demand due to advance design and updated product trends. In the foreign market, design/quality and delivery (reliability) is the key to competitiveness. Although price comes into play but discriminating customers are willing to pay more money for unique and rare find pieces,” he said.

Markets

The local GTH sector exports products to US, Europe and Asia.

Philexport-Cebu also noted a recovery in Cebu’s exports of fashion accessories.

Escalona said that shipments of these products have shown encouraging growth in the last few months of this year.

“We have seen remarkable increase of shipment volumes from the fashion accessory sector,” he said.

Prospects for 2015 remain positive, according to Escalona. However, he said the industry should take a cautious approach as main trading partners like Japan, the US and Europe face various phases of economic and political changes.

Japan’s third quarter growth dropped by 1.9 percent while EU growth is seen to slow down with Greece requiring new rescue facility from the International Monetary Fund.

The US will also be holding a presidential election by November.

However, price of crude oil crashing in the international markets, improving jobs numbers in the US and moderate growth in the EU may change the global business landscape.

“Cheaper oil and gasoline prices could spur growth in the economies too dependent on imported oil,” he said. He noted, however, that lower crude oil is not all good as major oil producing countries will become pessimistic, which can lead to less spending and low consumer confidence in those countries. It can then affect exporters to these countries.

Escalona also warned that players should consider regional tensions, especially in South China sea, as these could affect global trade next year.

“Under normal conditions though some export sectors in the Philippines will do well while some sectors will be hurt by outside influences,” he said.

Delantar said 2015 can be a promising year for GTH manufacturers, if local investments in tourism facilities, real estate sector development and increased domestic income continue to grow.

He also advised exporters to balance sales and marketing effort for both domestic and export market, especially in the Asean region, where growth potential is still in the upswing.

The furniture industry also has a positive outlook for 2015, with the improved economies of their markets. Booth, however, said they will be settling on a conservative growth target of five to seven percent next year.

He said the furniture players started producing different materials with mix-media look to spur growthe. The organization is also working closely with government agencies in the promotion of their products and tapping other growth markets overseas.

‘Coopetition’

“Coopetition” instead of competition will be the name of the game in 2015, said Genson.

While the government is keen on helping the industry grow and maximize the opportunities of the Asean integration, Genson advised fellow exporters to constantly innovate to stay relevant.

Escalona said the government should come up with more incentives for the export industry operators especially in trade promotion and shows, while the banks and other credit institutions should ease or liberalize their current lending requirements and practices.

Additionally, government should make sure that the benefits of low oil prices are translated into cheaper goods and services for Filipinos to enjoy. It should also expand infrastructure such as international seaports and airports as the current congestion in major ports Manila and Cebu could be a drag on the country’s export performance.

Industry clustering, according to Escalona, is also vital to consolidate strengths and drive logistics cost downwards.

Lower tax rate

“Our Asian neighbors like Thailand, Malaysia and Vietnam have already initiated industry clustering, although this move is quite a challenge for us because we are an archipelago, this should push us to be more competitive,” said Genson.

Aside from that, the umbrella organization of Cebu-based exporters is also calling for a lower tax rate for corporations and individuals to allow companies to re-engineer their cost structures to make the country more competitive when trade barriers are eventually removed, especially in free trade zones and other trade blocs.

Escalona further said that industry players should bond together to advocate for lower tax rates and fast track the constructions of additional capacity in our seaports or airports.

“If space is a constraint the industry should fight for the construction of these ports,” he said.

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