Red Sea crisis could draw investments to Phl – ECCP
The Red Sea crisis may serve as an opportunity for the Philippines to attract more European companies into the country, according to the European Chamber of Commerce of the Philippines (ECCP).
In an interview with reporters, ECCP president Paulo Duarte said the Red Sea crisis would not necessarily have a big impact on most European companies established in Southeast Asia as they have localized production.
“This is not a critical point for European companies, because they have most of them, they have already established ones, they have local structures, local manufacturing in the regions so they can overcome that,” Duarte said.
“But this could be also an opportunity for the Philippines to attract more European companies to the country because then you reduce the dependency from such things,” he added.
While this may not have a big impact on most European firms in the region, Duarte acknowledged the need to observe how the issue is going to develop.
“Of course, (I) highlighted some tensions that we have in the outside world that affect not only Philippines but entire markets, worldwide. So it’s impacted worldwide level. So we cannot ignore [this] when we are also positively mentioning the opportunities of the Philippines. We cannot ignore that outside of the Philippines, (there are) some dark clouds that are not helping,” Duarte said.
Duarte said they are mostly optimistic of the growth of the Philippine economy this year, despite external challenges.
“I would say that despite the macro economic and global, world turmoil as we know there are some impacts with regards to the invasion of Ukraine by Russia, the dispute in Palestine and Israel, the dispute now in the Red Sea. Despite all of these, we remain, as part of our presentation, we remain mostly positive with regards to the performance of the Philippines economy also for 2024,” he added.
Philippine Economic Zone Authority director-general Tereso Panga earlier said the closure and shutdown of the Red Sea to trade would make shipping costs 15 percent more expensive and add 10 days for the exchange of goods between Europe and Asia.
“It will definitely affect global trade, delaying production and deliveries of products and resources, thereby increasing the cost of goods,” Panga said.
Panga warned this could translate to higher inflation in different parts of the world.
“We have yet to feel the effects in the Philippines but we are proactively working together with other concerned agencies to derisk global supply chains that may affect our locators in particular and the whole economy in general,” Panga said.
According to Panga, the agency is collaborating with the affected registered business enterprises that are importing and exporting to and from Europe and the Mediterranean to ensure that the least possible effects would be felt as contingencies are set in place in anticipation of any major conflict.
Latest data from the PEZA showed there are 448 registered business enterprises engaged in exports to Europe and 523 RBEs engaged in imports from Europe.
The results of a survey with 347 respondents recently conducted by PEZA showed that 24 percent or 84 enterprises confirmed significant effects on their operations due to the Red Sea crisis.
On the other hand, 73 percent or 252 respondents stated that they are not affected by the said crisis.
The PEZA said the effects on registered enterprises include a seven- to 20-day delay in import shipments and the rearrangement of vessels for materials coming from Europe, leading to longer lead times and potential reductions in production capacity.
Negative effects also encompass limited vessels, shortages of containers, port congestion in the West Coast and late confirmation of booking.
The United Nations Conference on Trade and Development (UNCTAD) recently raised the alarm about the increasing disruptions in global trade, attributed to escalating geopolitical tensions and the impact of climate change on vital trade routes around the world.
The UNCTAD expressed profound concerns over the escalating disruptions in global trade, particularly stemming geopolitical tensions affecting shipping in the Black Sea, recent attacks on shipping in the Red Sea affecting the Suez Canal and the impact of climate change on the Panama Canal.
“UNCTAD underscores the farreaching economic implications of these disruptions. Prolonged interruptions, particularly in container shipping, pose a direct threat to global supply chains, potentially leading to delayed deliveries and heightened costs,” it said.
While current container rates are approximately half of the peak during the COVID-19 crisis, it added passing on higher freight rates to consumers takes time, with the full impact expected to manifest within a year.