THE country’s export industry remained sluggish this year while the global market remained depressed.
Cebu’s export industry, specifically, will end 2015 with no growth to show for all their efforts, said Philexport Cebu President Nelson Bascones.
“Cebu, which for accounts two percent of the country’s total exports, dropped by nine percent from January to September,” he said. “It’s a negative growth for Cebu’s export industry.”
The latest statistics showed the country’s total export receipts dropped by 10.8 percent in October this year, its seventh straight month of decline.
The umbrella organization of exporters said the industry is facing threats from the impending elections in the US, which is the country’s major trading partner; no clear signs of sustainable recovery from deflation in Japan; the continuing downspin of China’s economy; intense competition in the Southeast Asian region next year; and continuing political uncertainties in the Middle East and Europe.
“If there’s a sector that is growing it is only electronics. The rest are feeling the softening of the global market,” said Bascones, whose Central Seafoods Inc. exports processed food.
A huge drop of 30 percent has been registered in the processed food sector alone, said Bascones.
Minimal growth, meanwhile, was observed in the wearables sector; gift, decors and house wares (GDH); and furniture. But Philexport Cebu Executive Director Fred Escalona thinks the growth may not be sustainable as exporters also observed a slowdown in orders, especially from huge markets like China.
“Winners and losers now are per company and not per sector. Those who already have captive markets are doing well but those companies whose engagement is in economies that have problems are suffering,” said Escalona.
“The GDH sector is lucky enough to slowly gain back its momentum. Not strong, but there’s movement due to the rising cost in China and lack of manpower willing to do GDH manufacturing,” said exporter Pete Delantar, owner of Nature’s Legacy.
Moreover, other factors that challenged the sector this year include the country’s stricter regulations that increased the cost of doing business; loss of productivity due to bad infrastructure; and loss of highly-skilled workers who went after jobs abroad.
Last July, Philexport Cebu complained about the tedious process of securing different permits, licenses, and registration of documents required by different regulatory agencies on the importation of controlled chemical substances commonly used in the export sector.
These regulations on commonly used chemicals were suspended starting Dec. 9, 2015 until on Feb. 9, 2016, under guidelines issued by the Philippine National Police (PNP).
“Our hard work is paying off, although it is a battle just partially won. A new categorization of these controlled chemicals is also being undertaken,” said Bascones.
Another challenge faced by the sector is the projected increase in interest from the financial sector as a result of the US Federal Reserve’s raising of interest, Delantar said.
To offset losses caused by the impact of the global slowdown and tight competition, exporters have turned to the domestic market. Other players diversified their products and entered new markets to stay relevant.
“The demand of the local market has gone up. From less than one percent in the past years, the share of the local market in terms of sales now stands at 10 to 12 percent,” said Bascones.
He attributed the robust domestic scene to the improved buying power of Filipinos and the booming industries of tourism and real estate, which are driving the demand for export quality home decor and furniture, among other export products.
Philexport remains upbeat that the country’s economy will sustain its “remarkable growth rate” in 2016, amid forecasts that global trade will face headwinds.
At a recent trade gathering, Philexport President Sergio Ortiz Luis Jr. was quoted as saying the country will remain a “bright spot” in Asia in 2016 despite the global export slump and that the “domestic drivers can sustain economic expansion despite external shocks.”
Ortiz Luis, in a report, said the economy has a number of advantages, including its being relatively insulated from global upheavals compared to more open economies in the region. In addition, the country, he said, has “strong fundamentals” and derives “a larger percentage of growth” from domestic consumption.
“We in the export business remain optimistic about next year,” said Bascones. He, however, pointed out that the growth prospects of the country are likely dependent on the growth of its trading partners like US, Japan, China, and Europe.
“We expect improvements of the global market after the elections. We are looking forward to more economic activities by next year,” Bascones added.
Delantar, on the other hand, said there are a lot of areas to seek growth opportunities depending on the willingness of the business owners to adapt to new trends.
He cited the Southeast Asian market, which will be more integrated in 2016; the local market for goods and services; and the booming travel and tourism industry as some of the areas of opportunities in 2016.
P20B in collateral-free loans
Moreover, Ortiz Luis urged both private and public sectors to help micro, small and medium enterprises (MSMEs) to increase productivity by providing them access to financing.
He pointed out the need to widen financing options, “specifically by government allocating P20 billion in loans for MSMEs to directly tap without going through the usual collateral requirements, interest rate issues, strict re-payment period, and long documentation processes, among others.”
Ortiz Luiz also called for a “pro-MSME agenda” that will mainstream this sector in the global supply chain and address the barriers they face in international trade. The Philexport official also called for the development of the necessary infrastructure, transportation and communication facilities to unclog roads and other bottlenecks, address loopholes in the supply chain, and promote innovation and productivity.