How it was and what may lie ahead

Today’s auspicious date, 1-1-11, hopefully marks a good year for Philippine business!

To be sure, we had quite a few big money maker industries for 2010.

Electronics – This industry has been moving too fast, registering a phenomenal growth rate of over 47 percent. According to Ernie Santiago, president of the Semi-Conductors and Electronics Industries of the Philippines, they had set a target of 30 percent or $28 billion before the end of the year. In their first 9 months, they had already raked up $23 billion, with $1.2 billion in new investments, so they are looking at $30 billion before the year ends, maybe even more. The industry is currently employing 502,000 and hopes to generate 26,000 more new jobs by next year.

Franchising - Chairman Emeritus Samie Lim of the Philippine Franchising Association of the Philippines, says their industry grew by 20 percent this year. The industry is a raging bull, optimistic that by 2011, they will post a growth of 50-60 percent, especially with the country hosting the world franchise conference slated this year that will showcase many of our local franchises ready for international franchising, sealing the country’s image as the “Franchise Hub of Asia”.

Export—the year 2007 saw the country’s biggest export sales, which sadly slid down by 40 percent when the crisis struck in 2008-09. The year 2010 saw a marked recovery, not quite in the same level as 2007 but at least approximating it. Sergio Ortiz Luis, president of PhilExport sees 2011 as another good year, though he says sales will not be as robust as 2010, with a growth rate of between 10 – 25 percent.

BPO—The Business Processing Association of the Philippines, through its president Oscar Sanez, reported a growth 20 percent higher than last year and sales of about $9 billion, with the non-voice sector registering the fastest growth among all its sectors. They have just finished their 5-year plan called the Road Map 2016 Project where they line up the initiatives, plans for partnerships with government, scholarships, educational reforms, marketing (through investment missions to U.S., U.K., Australia, etc.), so 2011 should be even a better year. If they achieve their objectives, it would mean 650,000 new jobs for Filipinos, at 30,000 jobs / year, and hit $35 billion by 2016. That’s about 10 percent of our GDP!

Philippine Economic Zone Authority – PEZA has always been one of the best performing agencies in the government, and they have always been exceeding their targets. Last year, their targets were: 15 percent increase in investments (2010 achievement: 28 percent more investments); export – 10 percent (2010: 26 percent increase); employment – 10 percent (2010: 20.3 percent increase). In short, they have doubled their targets, and Executive Director Lilia de Lima says they have approved about 9 very good agri-industrial projects in 2010, which should start operating by this year.

Manufacturing –president of the Federation of Philippine Industries Jesus Arranza says 2010 was still a good year for manufacturing, notwithstanding the drop in production due to rampant smuggling. The affable and dedicated federation president has taken up the cudgels for our local manufacturers, adding that the government loses about P127 billion a year in taxes and duties because of smuggling. They have also signed a MOA with the Dept. of Justice to provide technical support in the prosecution of smugglers. Jess adds that they are very optimistic about reforms in this area with the new Administration.

Real Estate – This one really boomed in 2010, with the Chamber of Real Estate & Builders Association reporting that 80 percent of their significant growth came from OFWs, according to CREBA president Florentino Dulalia. This is good news indeed. Hopefully, our housing deficiency will be greatly reduced in the next few years.

Bio-ethanol – No marked change from 2009 to 2010 was seen by the industry leaders, according to Ms. Techie Cruz-Capellan, although she shares that a Japanese group has committed and confirmed investments for a 50 million- liter bio-ethanol plant in Isabela. One of our biggest players, Roxol Bio Energy, has a 30 million liters capacity. For renewable energy, prospective investors are just awaiting the final release by the Energy Regulatory Commission of the tariff that will be given for solar energy.

Plastic – incumbent president Crispin Lao, of the Philippine Plastic Industry Association says the industry remarkably picked up in 2010, despite the tariff distortions they have been beefing about for so long now (manufacturers have to pay 15 percent tariff for raw materials while imported finished plastic products from our ASEAN neighbors are allowed to come in tax-free). However, the sector that is facing a decline is the plastic bags due to strong lobbying from environmentalists. The association hopes that with the Recovery Program they have initiated which includes recycling of used plastic bags into fashionable bags, thereby providing livelihood to the marginalized women sector, they can somehow counter the negative image of plastic. As they say, “If we can recover it, we can recycle it. Why ban it?”

Travel – After the 2009 “hostage-taking” debacle, Paz Alberto, president of Philippine Travel Agencies Association (PTAA) and of Ark Travel, says 2010 can still be said to be a good year. Their main beef is the low internet fares and these have rendered them uncompetitive. Of course, their edge is still ‘Service’, and their reliability and efficiency. We heard from Paz that there are low-cost airlines going to Cebu, Boracay and Tagbilaran straight from Russia. No matter the odds, the travel agencies are still bullish about tourism and relentlessly promote the country in travel fairs abroad. Their Travel Tour Expo at the SMX is on Feb. 18-20 where airlines will give special rates.

Coffee—We still have very low production at 23,000 MT, made worse by El Niño. However, Ms. Chit Juan, co-chair of the Philippine Coffee Board, is optimistic for 2011. The board’s target is for local production to reach the consumption level of 65,000 MT so we can stop importing coffee. The areas showing the most potentials are Mindanao (Mt. Apo area) because there is still so much land here, Baguio (the Cordillera mountain area where Arabica is grown), Negros area in the Visayas where new trees have been planted, and Cavite where coffee growing is already strong. Chit says “Until I taste good coffee in every hotel here, our job is not yet done.”

Animal Industry—Chairman of ProPork, Albert Lim laments the 40-50 percent increase in illegal pork importations. This is the same complaint of the poultry farmers, through their association, the United Broiler Raisers Association (UBRA) whose president Gregorio San Diego says that if the government will only stop the importation of chicken, the industry can produce enough to even export. The pork producers says that their P160 billion industry is in peril due to these illegal importations, virtually garbage dumped at low prices in the wet markets, if the government does not act quickly. Same with the chicken/egg industry which, for the first time in so long has suffered from a price slump in the holiday season. With a bad 2010, they are not optimistic about 2011 unless the government acts to stop the importations. The good news is, the whole country has been declared FMD-free, so Singapore is now poised to import pork from us again.

Sugar- The drought, then the typhoons, caused a slump in sugar production, according to Archimedes Amarra, Exec. Director of the Philippine Sugar Millers Association. Because farmers had to replant, the late milling affected the market price. Supply was compromised for a while, though steady stockpiling has normalized this for now. Importation is still needed though, and the whole industry is preparing for the AFTA rates which will bring down tariff rates from the present 38 percent to 5 percent in 2015. Climate change has affected world supply and prices such that major producers like Pakistan, Thailand, Indonesia and China have been impacted heavily. The association expects the high sugar prices to prevail in 2011 which will setback the bio-ethanol industry because it will make bio-ethanol products uncompetitive.

Briefly, this is how our major industries fared in 2010. In a global environment now normalized, optimism remains high for 2011.

Happy New Year to all.

Mabuhay!!! Be proud to be a Filipino.          

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