Red tape, energy prices bug German companies in PHL

GERMAN firms operating in the Philippines have identified economic policy conditions, prices of energy and supply chain disruptions as the risks that could impact future economic growth, according to the Spring 2024 AHK World Business Outlook Survey conducted by the German-philippine Chamber of Commerce and Industry (GPCCI).

According to GPCCI, economic policy conditions topped the list due to “complex regulations, frequent policy changes, and extensive bureaucracy creating an unpredictable environment.”

Another “significant” concern that businesses raised is the high energy prices which they said could impact profit margins and operational costs, particularly for energyintensive sectors like manufacturing.

“Additionally, challenges such as supply chain disruptions and infrastructure are tied for third, with both factors contributing to operational inefficiencies,” said GPCCI in a statement on Monday.

Despite these risks, the results of the Spring 2024 survey conducted by GPCCI showed that 50 percent of German-philippine businesses are still optimistic about their business situation.

As to company expectations, 61 percent of the responding firms are optimistic on their firms’ business development for the next 12 months.

However, to be able to capitalize on the current “economic optimism,” GPCCI Board Director and Policy and Advocacy Chairperson Marian Norbert Majer said, “it’s imperative that the Philippine government work closely with businesses to resolve these identified challenges.”

“Addressing these issues can help create a more predictable and favorable business environment and ensure that this bullish momentum translates into substantial outcomes that will help the Philippines attain its sustained economic growth,” Majer added.

Meanwhile, GPCCI divulged the “diversification” strategies that responding companies have taken towards “enhancing” the resilience of their business operations amid the risks that they mentioned such as economic policy conditions, among others.

For instance, the chamber said, “they have reported expanding their supplier networks and exploring new sales markets to mitigate the risks of future disruptions.”

However, the GPCCI also stressed that this diversification is not spared from challenges.

“The primary obstacles identified include increased legal and regulatory issues, which respondents ranked as their top concern, followed by difficulties in finding suitable suppliers or business partners, and the high costs associated with expanding business operations,” said the chamber.

On assessing their preparedness to handle international crises and geopolitical risks, the GPCCI survey indicated that the confidence level among these firms shows room for improvement, with 55 percent or more than half of the firm noting that they are only “averagely prepared” to tackle such challenges, indicating a “moderate level of resilience,” while only 34 percent consider readiness as “good.”

With this, GPCCI Executive Director Christopher Zimmer stressed, “Our network continuously assesses the resilience of German companies’ supply chains at their international locations, aiming to significantly mitigate the risk of future disruptions, such as transport interruptions or the sudden loss of production facilities.”

“We see that our respondents in the Philippines are actively enhancing the resilience of their operations by expanding supplier networks and venturing into new markets,” Zimmer added.

The AHK World Business Outlook Spring 2024 Survey in the Philippines was initiated by GPCCI. Almost 70 companies related to German-philippines business relations are participants.

The participating sectors are from the services (59 pecent), trade (14 percent), and the manufacturing or construction sectors (27 percent).