The ups and downs of PHL exports in 2012

When exports in the electronics sector dipped mid-year, it slowed the country's exports growth rate to a crawl—no surprise, as electronics constitute nearly half of the country's exports. After five consecutive months of declines, the subsector posted a  1.1 percent gain year-on-year in September, only to turn sluggish by growing 0.3 percent in October. National Statistics Office data show that total exports for the first 10 months of the year are valued at $44.475 billion, a 7.1-percent growth over the same period last year. Still, the merchandise exports growth in the year to end-October has confirmed to some  insiders that the government's 10 percent target this year would not be reached.   “[M]eeting the target of 10 percent is unlikely,” Philippine Exporters Confederation (PhilExports) president Sergio Ortiz-Luis  told GMA News Online earlier this month.   “[Hitting the target is] getting dimmer now, with electronics not sustaining its growth,” he added. Ortiz-Luis, who is also vice chairman of the Export Development Council, said merchandise exports will “likely grow between 7 to 8 percent.” A rebound in the third quarter as other subsectors picked up the slack buoyed hopes for next year, with exporters now projecting  an 11-percent growth for 2013. Anchored on recovery However, Ortiz-Luis said the double-digit growth projection is anchored on the increasing market share of services exports in the country's total shipments and a recovery in the electronics sector. "Electronics I think will improve somehow. I don't think [the slump] will last forever. It will end sooner or later... maybe towards the beginning of 2013," Ortiz-Luis said in a separate statement. University of Asia and the Pacific economist Peter Lee U attributed the lukewarm performance of electronics to an equally tepid demand from major economies.   “It is still global uncertainties – problems in Europe and US, which were top exports destinations – that cause the flat growth in electronics exports,” he said. Electronics exports in the 10 months to October totalled P19.32 billion, down 6.6 percent year-on-year. The Semiconductor and Electronics Industries in the Philippines (SEIPI) forecast that electronics and semiconductor exports this year will not exceed 6 percent, and will probably not make it to 7 percent as previously thought. Trade Undersecretary and Board of Investments managing head Adrian Cristobal said the country needs to diversify its exports so as not to rely so much on electronics. "Electronics, our key export product to the EU, is mostly [foreign direct investment]-driven. While we see growth of non-electronics exports to the EU and agriculture products, we also recognize the need to diversify our exports and product offerings while attracting more investments," he said. Fearless forecast With just days remaining before 2012 ends, however, the Trade Department has made a fearless forecast that the all-time high of $51.4 billion in exports recorded in 2010 will be surpassed this year. At the recent National Export Congress in Manila early this month, Trade Undersecretary Cristino Panlilio said he expected exporters to "... do their darnest best" for the remainder of the year. "I believe they can do $12 billion more," Panlilio said in an interview with reporters. Ortiz-Luis noted the figures in the first nine months showed non-electronic products—such as furniture and fixtures, metal and agriculture products—remain strong. "On the services side, it would be tourism and business process outsourcing," he said. "They [services sector] are exactly as big as the electronics." Ortiz-Luis said the exports sector's earlier target of 10-percent growth this year is doable, but according to a Reuters report earlier this month, the Bangko Sentral ng Pilipinas has already lowered its exports growth forecast for the year to 8 percent. Shared services facilities The government has approved a  P770-million budget for the Trade Department's shared services facilities program which, said the department, "aims to provide MSMEs [micro, small and medium-sized enterprises] affordable means to package their products and eventually turn these enterprises into world-class exporters." SSFs are expected to ensure a steady and strong supply chain in the country, as well as improve the capability of MSMEs—especially those that produce for the export market—in processing raw materials, and improve their productivity and quality. Trade Secretary Gregory Domingo earlier said 1,000 SSFs will be established all over the country next year, noting the budget for the program will be raised to P1 billion by 2014. Innovation and design Stiff competition in the global markets means exporters and manufacturers need to continue setting priorities on product quality and design, Domingo said. He said exports need innovation—and Filipinos aiming high. "We should not compete in the low-cost products, because we are no longer competing there. We should compete in quality and design," he said at the exporters event. "This is really what eventually will distinguish us in the foreign markets for our export. We have to come up continually with new products... that excite," he added. Bananas after 'Pablo' Banana growers took a heavy hit when Typhoon Pablo devastated parts of Mindanao and Visayas two weeks ago and left at least 10,000 hectares planted to [the commodity] in ruins.“ If we translate this to value, it’s about P5.7 billion worth of harvest for the year end. It’s a pretty expensive opportunity lost for the industry,” Pilipino Banana Growers and Exporters Association (PBGEA) executive director Stephen Antig told GMA News Online on December 6. “But if we include the infrastructure, that would shoot up to P8 billion.” Antig added that these numbers are “very conservative,” saying that “they only cover the 42,000 hectares of our organization... This does not include the small, independent growers[.]” The DTI said banana shipments may experience a drop in volume next year as a result of the typhoon. "In terms of volume, it is highly likely that banana exports will decrease. It will take some time to rehabilitate the farms damaged by the typhoon," the Trade Department's Cristobal said in a separate interview. "But in terms of value of banana exports, that depends on how supply affects prices. It is possible to have lower volume, but higher value.” Bureau of Export Trade Promotion executive director Senen Perlada agreed with that premise. "[I]t is possible that higher prices may offset decline in volume and banana export revenues to [still] show growth," he said. Perlada added that approximately "18 percent of total banana planted hectarage" was damaged by the typhoon, citing govenrment data. "It will take around nine to 12 months to rehabilitate," he said, adding that small players were most affected by the typhoon. Perlada cited latest data from the National Statistics Office showing that fresh banana exports from January to September this year reached $453.3 million, roughly 1.1 percent of total merchandise exports for the period. Export value was up 28.1 percent year-on-year. The bulk was sent to Japan, the top destination for Philippine fruit shipments. The banana industry was also hit by the stricter phytosanitary measures placed by China on imports which affected shipments to that country, one of the leading destinations of local bananas. As a contingency, the Trade Department embarked on aggressive "banana missions" to other countries to promote the fruit, especially to non-traditional markets like the European Union. — BM/VS, GMA News