FPI Chairman’s Annual Report Message: ‘Where have some industries gone?’

The Covid-19 pandemic has brought about undeniable adverse impacts to all sectors of the Philippine economy. And as we build back better and more, we see a rosy economic outlook for the Philippines in 2023. But there will be challenges that we have to confront, and dealing with these challenges will require the full might of the strongest political will our government leaders can muster to see the Philippine economy flourish. This is the essence of my Annual Report Message to the officers and members of the Federation of Philippine Industries, and to all our countrymen.

As the Federation of Philippine Industries (FPI) turns a new leaf on its advocacy for industry stakeholders, consumers and the whole nation, I am honored and privileged to report, as FPI Chairman, another milestone year for the Federation.

The year that just ended was a very challenging one for FPI. But even with our limited resources, we never wavered in our fight against smuggling. The worst economic scourge that creeps into the life of every Filipino, smuggling spares no one. Not only is the government losing P250 billion of badly needed revenues to smugglers every year, but the illegal importation of cheaper but unverified/uncertified products sans compliance to mandatory standards and without paying appropriate duties and taxes is creating unfair competition to locally produced goods.

The P250 billion in revenues lost by the government to smuggling each year in terms of foregone corporate taxes and value added tax represent only the 12 percent VAT and corporate taxes lost by the government to smugglers. Its total impact to the nation’s economy, however, could add up to over P2.03 trillion worth of illegally imported goods.

Displacing locally produced goods from the domestic market, smuggled products create unfair competition for local manufacturers, leaving them with no option but to downsize their operation, undertake production slowdown, if not entirely closing down their business. Smuggling practically caused the collapse of the country’s once flourishing textile industry, tire industry, glass industry and steel industry, among others.

The country’s textile industry, for instance, used to have over 1.5 million spindles to spin yarn. Today it only has a little over a hundred thousand spindles to spin yarn. We also had six tire companies in the country several years back. But now, we only have one tire company operating at Clark Freeport Zone. The country’s only glass manufacturing company’s competitiveness in the domestic market is also greatly affected by the courts’ snail-paced handling of the petition to lift the injunction ordering DTI to stop implementing its mandatory standard on glass.

A legal issue largely affecting the country’s glass industry, the resolution of the petition to lift the injunction on the DTI order remain pending at the courts for over three years now. Meanwhile, with the injunction issue still unresolved, the government cannot fully regulate the entry of glass products into the domestic market, particularly their compliance to product standards, putting at risk the safety of consumers, even as this creates unfair competition for the country’s only glass manufacturing company. The country’s steel industry is also adversely affected by the government’s confusing, if not inconsistent, regulatory policies to protect consumers and the domestic market. Take for instance the 5,000 metric tons of steel bar importation intercepted at Subic Port that was released, even if only three steel bars were submitted for sampling and just one bar was tested for the whole batch’s compliance to set standards. Contrast this with the predicament of local steel bar manufacturers that are required to test one steel bar for every 20 tons of steel bars that roll off their production lines. I questioned the release of the imported steel bars and was sued for doing so. The case against me was, however, dismissed by the court. But I find bias in this government policy on imported steel bars, which is affecting the local steel industry.

Fortunately, because of our calls for the government to provide a level playing for local industry players, the sampling issue on steel bars has been addressed. But the government’s policy allowing the importation of obsolete induction furnace, a banned heating system in China, is also adversely affecting the local steel industry.

Other industries have also been adversely affected by the country’s unabated smuggling problem. So let us help stop the bleeding of the economy and the manufacturing industry caused by smugglers. Now is the time for FPI to fight smuggling as one strong community, because we have a government that is concerned about the plight of the local industry.

Our voice may have been faint amid the big political and economic ruckus that unfolded in the country last year. But we never gave up. And the small voice of FPI was finally heard by the nation’s top leadership and the big names in business. My letter to President Ferdinand R. Marcos Jr., asking for his Excellency’s intervention on the smuggling of Palm olein, a concern that is hurting the country’s coconut industry, got a favorable response from the Office of the President.

In another letter to the President, my suggestion for his Excellency’s intervention on the sugar allocations issue, a concern that is affecting our members from the confectionary industry, was also acknowledged by the Office of the President. But it’s not only the public sector that recognized our efforts. The private sector did as well. A global manufacturing company also saw the good potentials of Fight Illicit Trade (Fight IT). The global company is now actively helping the campaign against all forms of illicit trade. And it is my pleasure to announce that this year, Product Standards, a magazine designed to inform and educate consumers about the importance of buying only quality standard products, will be launched.

Let us therefore work together as one strong FPI community in the fight against all forms of illicit trade. And let us align the concerns of the administration of President Ferdinand R. Marcos Jr. to our cause. We do not have the luxury of time to wait for another opportunity to protect the local manufacturing industry. After all, this might be the only opportunity for us to save our manufacturing industry, before smugglers take over our factories.

In closing, I am reminded about the baby boomer song “Where have all the f lowers gone? ”, which appropriately reminds us about the sad reality currently confronting our manufacturing industry. With some changes to its lyrics, I find the tune most appropriate for our cause, so we sing: “Where have some industries gone? Long time passing.

“Where have some industries gone? Long time ago.

“Where have some industries gone? Beaten by smugglers one by one.

“Oh, when will we ever learn? When will we ever learn?”

Thank you.

Dr. Jesus Lim Arranza is the chairman of the Federation of Philippine Industries and Fight Illicit Trade; a broad-based, multisectoral movement intended to protect consumers, safeguard government revenues and shield legitimate industries from the ill effects of smuggling.