Stronger peso riles Cebu exporters

Sun.Star: CEBU CITY -- Filipino exporters are starting to look outside the United States, traditionally their largest market for electronics, furniture and other exports, to cope with a peso that's been rising for nearly three years. "When business is going well with the United States, we don't see any Filipino entrepreneurs knocking on our doors," said Klaas de Boer, a consultant of the Dutch government's Center for the Promotion of Imports from Developing Countries (CBI). "But as soon as there's a recession or as soon as there is a decline in business because of Chinese competition, all of a sudden, the telephone rings in Belgium, The Netherlands or Germany, and they say, 'We need your help.'" De Boer stayed in Cebu recently to train 42 local consultants, most of them exporters, as part of an export marketing and management course organized and funded by CBI for 250,000 Euros (about P15.2 million). In February, the consultants will leave for Rotterdam to present their marketing plans, wrap up the course and interact with potential European buyers. Since November 2005, the peso has gained P11.35 against the US dollar. That's 20.8 percent off the value of the dollars that exporters and overseas Filipino workers have been bringing in. A strong peso cushions the blow from rising oil prices and helps keep inflation down, but it also erodes the earnings of overseas workers and exporters. "In peso terms, total exports plummeted to negative 4.9 percent from 9.2 percent last year, the effect of the appreciation of the peso against the dollar," the National Statistical Coordinating Board said in its third-quarter report for 2007. More than 50,000 jobs lost Of the top 10 merchandise exports, only two items-crude coconut oil (70 percent) and ignition wiring sets (3.6 percent)-grew in the third quarter from last year's figures. For everything else, there was no growth to speak of. Garment exports dropped by -22.6 percent; semiconductors and electronic microcircuits, -10.7 percent; and other manufactured products, such as furniture, -34.3 percent. Furniture exporter Jay Yuvallos, president of the 13-year-old company Interior Basics in Mactan, knows these grim figures only too well. "In general, the future of small and medium enterprise (SME) exporters is really a big question mark," Yuvallos said. "We really can't survive the competition in the international market if the cost of raw materials, supplies and labor continues to rise. Power cost in our country is very high; in fact it's the second most expensive in Asia, next only to Japan, and our labor productivity remains low." Yuvallos is also president of the Confederation of Philippine Exporters (Philexport) in Cebu, which warned in a position paper last May that "more than 50,000 breadwinners" have lost their jobs in SME companies alone since early 2006. While government agencies contributed to the P280-million Export Development Fund, Yuvallos said that exporters wish that more aggressive efforts can be taken in such areas as subsidies on market intelligence, research and development, international trade fair participation, promotional materials and activities geared toward finding new market opportunities, particularly the European Union. "And of course a more favorable currency exchange rate," Yuvallos added. The lack of collaboration with other industries, such as machine shops, also hobbles exporters, said Dr. Victorina Zosa, an economist who heads the Research Office at the University of San Carlos in Cebu City. "We never really expanded our market and are still heavily dependent on the US economy," Dr. Zosa said. "The Japanese have already supplanted the US in terms of foreign direct investment and official development assistance, but we have not really explored the potential of other markets outside the US." No longer the 'Milan of Asia' The problem is more serious than exporters' shrinking profit margins. In a paper she wrote in 2004 for the Philippine Institute of Development Studies, Dr. Zosa pointed out: "Cebu's export-led growth reduced poverty by approximately 8 percent from 1988 to 2000." From 1990 to 2002, the Cebu exports' share in the gross regional domestic product (GRDP) of Central Visayas grew from 6.37 to 32.06 percent. Last year, for the first time since 2000, the Central Visayas' GRDP grew slower than the national average. "We have to recreate ourselves and shift our markets. If in 2003, our furniture industry made us the 'Milan of Asia', today that is no longer the case," Zosa said. The loss of designers and mechanical engineers to jobs abroad, as well as the poor quality of basic education in the Philippines, are among the challenges exporters face. Cebu's exporters, however, have dealt with tough times before, said Zosa. In the 1970's, the combined effects of a ban on the use of local rattan, Indonesia's refusal to export its rattan poles, and rising oil prices forced about 70 percent of all export firms to close shop. The rest recovered, she recalled, by integrating their supply chain with production and by working together to promote the sector. Instead of wringing their hands at the prospect of weak US demand in 2008, Filipino exporters can attempt to understand instead the different preferences of European consumers, de Boer said. "You cannot stand on one leg. At this moment, if you look at the international economy of the Philippines, you're only standing on one leg," he added. So far, the government has revised its projection for export growth in 2007 from 11 percent to only eight percent. "We made a regional export development plan, and the scenario was not that positive. I don't know what the basis for the eight percent is. But looking at the current scenario, I don't know. We definitely cannot expect growth coming from SME exporters," Yuvallos said. Gazing down at his quiet factory floor in Mactan, the exporter said it dismays him that the extent of the problem seems to have been downplayed. "Can you imagine a company retrenching some 100 employees?" he said, shaking his head. "They'll walk into your office on their last day, their last paycheck in hand. You know their families. Majority of them have tears in their eyes. How do you manage that?" - Sun.Star