Exporters see strong investment growth next year

The local electronics industry expects double-digit growth in investments next year, even as it braces for slower-than-expected growth in earnings this year due to impact from the continued peso appreciation. Invesments for the nine months to last September had reached $1.119 billion, exceeding the $748 million recorded for the entire 2006 and the $1-billion target set for this year, the Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI) said Friday. "This is a record high since 2000. We’re hoping for double digit growth next year, driven by local expansions," SEIPI President Ernesto B. Santiago told reporters Friday. Major electronics companies such as US-based Texas Instruments, Inc., as well as Japan’s Fujitsu, Hitachi, Terumo, Fuji Electric and Panasonic drove growth in investments, Mr. Santiago said. Strong global demand is also expected to drive export earnings this year to $32 billion from $30 billion last year, despite the industry’s slightly slower growth target of 5%-8% from an earlier projection of 10%. SEIPI Chairman Arthur J. Young said global demand for personal computers as well as consumer electronics and wireless products "is fairly healthy." "Demand is still there. Even with the weakening of the US market, growth in the Chinese market should compensate in terms of volume. There’s also the South American, European and Japanese markets. We expect higher demand next year," he told a press briefing. Challenges The weakening of the dollar as well as rising labor and power costs, however, continue to pose challenges, industry players said. The group said two electronics firms had decided to shut down their local operations due to rising costs. Uniden Electronics Philippines, Inc., which reopened its Philippine office in 2005, is relocating its office to Vietnam. The company closed its local operations in 2003 in the wake of a worldwide economic slowdown following the 9-11 terrorists attack in the United States. SEIPI declined to name the second electronics firm that is also moving to Vietnam. "The threat [to growth] is here," SEIPI said, adding the depreciation of equipment accounts for 40% of electronic firms’ costs, while labor and power account for 16% and 15%, respectively. Mr. Santiago said the industy is proposing ways to pare down power costs, including cutting down the power generation charge, removing royalties on indigenous fuels, putting in place an automatic power rate adjustment mechanism, and providing special power rates in economic zones. The local industry recently got a reprieve after state-owned National Power Corp. and power distributor Manila Electric Co. inked an agreement to bring down power rates for locators in 10 industrial estates and three economic zones. From a generation rate of P5.00 per kilowatt-hour (kWh), ecozone locators now stand to benefit from a discounted P3.52 per kWh. Mr. Santiago has said SEIPI is now studying schemes on how to reduce transmission and distribution costs, but added that they have yet to meet with Meralco and National Transmission Corp. officials. Exporters have been asking the Bangko Sentral to intervene more aggressively to slow the peso’s rise, but the latter is sticking to its policy of letting the market determine the peso-dollar exchange rate and to intervene only to prevent a steep rise or fall of the local currency. Exporters price their goods in dollars. A strong peso, therefore, diminishes their earnings. - Bernardette S. Sto. Domingo/BusinessWorld