Seaweed exporters push prepaid payment scheme
The Philippine seaweed exporters would rather lose 70 percent of the global market than lose the entire business by implementing the prepaid payment scheme, which has been regarded as “the most unconventional way of doing business” in the history of the export industry.
Seaweed Industry Association of the Philippines (SIAP) president Benson U. Dakay yesterday announced that his company, Shemberg Marketing Corporation, will take the lead in imposing the prepaid concept and convince other carrageenan exporters in the country to do the same or else shut down their plants.
“There will come a time that it is cheaper to close shop. We have implemented the prepaid payment term as our last resort to survive,” Dakay said.
Dakay said the Philippine seaweed export had been hit hard by two huge burdens, the shortage and declining quality of seaweed supply and the bloating of the peso’s value against the dollar.
The volatility of the peso resulted to a 25 percent revenue loss to the seaweed exporters, while the shortage problem of raw seaweed supply has pushed the prices by at least 40 percent since January of this year.
Shemberg is the largest carrageenan exporter in the world. Dakay said he is ready to let go of clients who will not concur with the prepaid payment scheme. He said losing a huge chunk of his global clients would be better than declaring bankruptcy, which will affect over 33,000 direct and indirect employees (including farmers) of Shemberg.
In an advisory sent to Shemberg’s clients all over the world, Dakay blamed the strong peso and the depleting raw seaweed supply as the two main reasons for the prepaid payment implementation.
Because of unpredictable value of the peso to a dollar, Dakay said “we discuss the price of the goods with the clients, by the time we receive the money.”
With this, he expects that some of his clients will not like this unconventional hedging tactic, and that other competitors may take advantage of this situation, especially
“Because of the rapid and daily appreciation of the peso, we are changing our payment terms to Cash Before Delivery [CBD], or Prepayment with Order [PWO],” Dakay stated in his marketing advisory sent to international clients.
In his letter to Senator Mar Roxas, Dakay expressed the difficulties of the industry, because of the uncontrolled strengthening of the peso against the US dollar.
“This scenario doesn’t just shrink our profitability but confuses us on where to position ourselves in dealing with our foreign business partners,” Dakay told Roxas in his letter.
He emphasized that the seaweed industry players who has not recovered from the raw material problem for the past years, are again in a severe test of survival.
“This double-whammy that we are facing makes us think twice whether to continue in the seaweed business,” added Dakay.
Already, because of this problem, few of small to medium carrageenan exporters have closed shop displacing about 10,000 farmers and workers. These are King Agro, Dahon Dagat, Geltech Hayco, Philippine Carrageenan, Natum and some small scale seaweed companies.
Slowly, Dakay said Philippine carrageenan products are no longer competitive in the world market.
“What worries us is when other countries take advantage of our export industry situation because most of them have stable currencies,” Dakay concluded.
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