So, so for the country’s export industry

An item in one of the dailies caught my attention: PhilExport is supposedly calling on the government to release their promised support of P2 billion for the export industry. Hasn’t it struck you that, now more than ever, we are wont to talk in billions, something not in our lingo before Napoles came to hog the headlines. Our departmental budgets were usually in the hundred millions, mind-boggling already to ordinary mortals like us. But now, we’re talking in billions and not sucking our breath in awe.

Anyway, when we finally got to talk with Mr. Sergio Ortiz-Luis (who incidentally is one of our “sukis” in the Business & Leisure TV show, always ready to oblige as a resource person when the topic of Philippine export comes up) he clarified that, to start with, there was really no commitment on the part of government to shell out the P2 billion assistance fund. This figure is what Philexport has arrived at if they are to fully implement the export development plan which they have devised in consultation with the stakeholders in the sector.

What was actually released by the government as budget for the export sector was a total of P80 million only which is light years away from the P2 billion that they were aspiring for. Of this P80 million, P20 million went to CITEM (which is attached to DTI (Department of Trade & Industry) and is in charge of trade exhibits mostly for exporters) and P60 million went to DTI as a regional fund and which they used to finance common service facilities. In short, none of the funds reached Philexport. Oh well, Mr. Ortiz-Luis says they were really intending to give some money to CITEM anyway, about the same amount in fact, because this agency needs it for the regular exhibits they mount for foreign buyers which are turning out to be excellent trade shows. We’ve always managed to cover these expos like the F.A.M.E., the furniture shows, etc., and have found them to be world-class, continually evolving and dynamic.

So what is happening now to our export industry? 2012 was basically a remnant of 2011, Philexport says, when the global economy was still weighed down. It was a very slow and painful recovery, though this became evident only in the first quarter of 2013.

Even our electronics and semi-conductors industry couldn’t drive up the index and found itself floundering badly. Despite two road maps that they have cleverly devised, it is just the nature of the industry that the landscape constantly changes. As of 2010, their export level was at $31 billion, and they were projecting a level of $56 billion by 2016. However, defying all their expectations, the export level declined, and in 2012, it stood at $23 billion, eroded by the princely sum of $8 billion. SEIPI (Semiconductors & Electronics Industry of the Philippines Inc.) president Mr. Dan Lachica says they now only have less than three years to come up to their short term target of $56 billion by 2016, and it’s just not doable at this point.

2012 was a big disappointment because the long-expected recovery did not happen for the electronics sector, though Mr. Lachica points out that it was not really a shrinkage. It was more of an inventory correction because the local companies had excess inventories which they had to deplete before they started manufacturing again. Add to that the forex component which though small at five percent still compounded the woes of the exporters.

The SEIPI president has a lot of very valid ideas that can help the industry. To start with, as of now, the electronics industry is running at 30 percent local content (unlike the service industry like call centers), so we are importing the bulk of the materials. He hopes the local partners like the chemical sector and the automotive industries can be linked with the multinationals, get the materials assessed and eventually end up supplying the multinationals. We have to increase the local content, that’s for sure. The automotive industry is a big partner, and in the electronics line, they supply the ABS system and the entertainment systems. Other suppliers include the copper industry and the mechanical assemblers.

For 2013, they are optimistically looking at a growth of five percent, and the engines for this growth are most likely the automotive and consumer electronics sectors. But the single biggest headache of this sector is still the high power cost in the country. Vietnam is positioning itself in electronics, and their power cost is half of ours. Samsung, which makes smart phones, has a $1 billion facility there, and I heard from some quarters that it is planning to expand this facility or put up another one in Vietnam. At half of our power rate, how can we possibly compete?

Hopes are high for the PEZA initiative which involves RES or Retail Electricity Suppliers where companies can qualify if they supply to PEZA locators within the zone.  I don’t know exactly how this works yet, but Mr. Lachica seems optimistic about it. He is also hopeful that our renewable energy industry can be big enough to complement the conventional power plants like solar and hydro, but cautions that the regulatory framework and environment should be friendly. There should be more players so that we can increase supply and reduce power cost – easier said than done.

Now come other suggestions like the 14th month pay which is viewed as an unwarranted burden to local companies. Mr. Sergio Ortiz-Luis says our labor cost in the country is high enough. Talks about adding mandatory bonuses and raising the minimum wage further are sending ripples of concern in the business community. He pointed out that in the formal sector, only 16 percent fall within the minimum wage, so raising this would only impact a small minority. 99 percent of the formal sector is composed of the micro, small and medium enterprises, he stressed, and we cannot afford to burden these small business concerns too much or they will choose to retrench or collapse. So let’s go easy on those new propositions.

Mabuhay!!! Be proud to be a Filipino.

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