‘Cautiously positive’ on exports
Exports in 2016: Search proceeds for new markets, new applications of Philippine products
CEBU’S export sector is likely to contract this year mainly due to the softening of global demand, which also has affected other export-oriented economies.
“Merchandise exports will not show any growth but might even show contraction. I’m afraid the contraction will be on the double-digit scale compared to 2015,” said Philexport Cebu Executive Director Fred Escalona. “I am concerned it might even be a big drop in merchandise exports if services are not included.”
The downward trend in export started in April 2015 and lasted until August 2016, which, according to Escalona, is just too big to overcome.
“The rebound in September 2016 is no indication of a sustainable run yet,” he said.
Garments, seaweed, electronics, some food products and coconut products are among those that brought in less export revenue.
“One of the biggest contributors to the losses was El Niño, which affected the food and seaweed sectors,” the Philexport Cebu official said, adding that the softening of global demand that has also affected other countries is another factor that caused exports to slow down.
Philexport President Sergio OrtizLuis has predicted a growth rate of three percent to zero for the national exports figure, although export players, according to Escalona, have long accepted that the 10 percent target set in the Philippine Export Development Plan can no longer be realized.
Saved at home
“The furniture sector would have suffered more if not for the domestic demand on account of the construction sector’s robust growth,” he noted.
Data from National Economic and Development Authority (Neda) 7 showed that exports in Central Visayas continued to decline this year, dropping by 7.4 percent from January to September.
The region’s exports value reached $3.13 billion during the first nine months of 2016 compared to the $3.38 billion re- corded in the same period last year.
Neda 7, however, noted that the slowdown this year is minimal compared to last year’s (2014 to 2015) fall of 16.8 percent during the same period.
“I don’t know if we had growth. In, general it is weak. There are orders, but not enough for the industry,” said Pete Sepulveda, one of the trustees of Cebu’s Gift, Decors and Houseware (GDH) sector.
“Natural materials have probably lost its glitter and novelty, given the prolonged worldwide slump. Growth is negative, if not, it is minimal, but the downward trend is already about a decade or more,” he noted.
Exporters in the seaweed and carrageenan sector also expect flat growth this year or even lower compared in 2015.
Seaweed Industry Association of the Philippines (Siap) chairman Max Ricohermoso attributed the demand slowdown to the “economic stagflation” in the First World countries.
“China also found Indonesia a cheaper source of raw dried seaweeds. Another
aggravating factor is the banning of sargassum gathering, transport and export, which should have contributed at least P500 million annually,” said Ricohermoso.
The Philippines used to have the greater share of the China seaweed market but Indonesia got the greater volume later due to its cheaper price.
Furniture players, on the other hand, continue to rely on the booming purchasing power of the domestic market to sur- vive the competition and weaker demand abroad.
According to Cebu Furniture Industries Foundation Inc. (CFIF) vice president for marketing Christina Maria Gaston, furniture players now see the local market as a permanent cure, instead of what was once thought as a Band-Aid solution for the 2008 recession.
“The times have changed, really. It is no longer the same as before. The buying pattern has also changed,” said Gaston. “Those who have survived the global crisis were those who found markets where they are relevant,” said Gaston, whose family owns the Hacienda Crafts Company in Manapla, Negros Occidental.
Woodcraft and fur- niture, which ranked fourth in the country’s list of top exports, recorded sales of $241.85 million in October 2016, down by 14.7 percent from the previous year’s level of $283.52 million, according to the Philippine Statistics Authority.
Total merchandise exports from January to October 2016 declined by 5.3 percent from $49.05 billion in 2015 to $46.44 billion in the same period this year.
Year of change
The year 2016 is considered a transition year for the country with the election of Rodrigo Duterte as the 16th President of the Philippines. His brash rhetoric (including sharp criticisms against the US and threats to redirect Philippine foreign policy toward China and Russia) though, have reportedly caused market jitters and discomfort among some foreign investors.
“It is too early to say whether or not the poor export performance is attributable to the new government, which only started in July 2016. Although the rhetoric of the current administration could somehow sow a cloud of uncertainty among our trading partners,” said Escalona.
“However, on the one hand, we are also developing new potential partners like China and Russia. Exporters still remain cautiously positive with the new government’s achievements in developing new deals with these two countries,” he added.
Sepulveda and Ricohermoso foresee a flat growth for GDH and a difficult year for seaweed/ carrageenan sectors in the immediate future.
Sepulveda worries about the uncertainty of the direction of the Philippines and US leadership. Europe, North America and Australia are the main markets of Cebu GDH exports.
“I think 2017 will still be a difficult year for the industry but stakeholders are on the lookout for new markets and new car- rageenan applications,” Ricohermoso said.
Last Nov. 17, the US National Organics Standards Board (NOSB) voted to remove carrageenan from the list of ingredients “approved for use in organic food” in 2018.
“We are still cautiously positive for the coming year as the icy relations with the USA have thawed a bit. Trump’s initiatives have somehow warmed the relationship between the US and Philippines,” Escalona noted.
Eye on China
He added: “We have to build the capacity to trade with China, since it is the world’s biggest market. We have to protect our trademarks, though. Innovation will be one of Philexport Cebu’s initiatives, and of course, to train our exporters on how to be price-competitive. Confidence-building is also in the agenda of Philexport Cebu to strengthen trade partnerships.”
Cebu GDH, on the other hand, is also eyeing the Middle East market because of their booming construction requirements. Sepulveda, however, stressed the need for government intervention to penetrate this potential market.
“New applications would be on murals, accents, interior decor of condos, hotels and shopping centers, among others, in the Middle East. This has not really been actively pursued, that’s why I suggested a very strong government intervention and support,” he said.
South America, Middle East, Africa and West Asia are also the new target markets of seaweed exporters. Ricohermoso added new applications are underway in nutraceuticals, health care, cosmetics and other industries.
“Carrageenan demand for these new applications is much greater than current usage,” he said.
Escalona is hopeful for a more vibrant global trade next year and the elimination of trade barriers to make exporting more convenient and efficient.
Sepulveda and Ricohermoso hope the government would take their plight seriously as there has been an extremely sharp decline in export performance of the three major craft industries in Cebu for the past decade already.
“We need the help of the Philippine Government to promote domestic products to be utilized by local companies. Let’s patronize our own products and produce,” said Ricohermoso.
We have to build the capacity to trade with China, since it is the world’s biggest market. We have to protect our trademarks, though. Innovation will be one of our initiatives. – Fred Escalona, Philexport Cebu executive director