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Trade Chief explains Philippines’ Export Performance in Q1 2019

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Based on the latest preliminary data from the Philippine Statistics Authority (PSA), our country’s merchandise export performance in the first quarter of 2019 has declined by 3.1%. Specifically, Electronics, which comprises more than half of our merchandise exports, dipped by 1.7% to US$ 8.8B. Non-electronics, on the other hand, decreased by 4.8% to US$ 7.5 B.

In general, we consider this as a reflection of the slowdown in the global economy. Exports of our Asian neighbors decreased even more: South Korea by 8.7%, Indonesia by 8.3%, Singapore by 6.3%, and Japan by 3.9%. Out of 11 trade-oriented Asian economies, 9 countries declined in their export performance and only Vietnam and China registered positive performance.

The Philippines, as part of a global production network is being affected by the negative sentiments brought by the US-China Trade War, since US and China are the top trading partners. According to industry players, global demand for electronic parts and final goods has been shrinking and will continue to weaken in 2019. In the case of the Philippines, this has been mirrored in the decline of exports in certain electronics sub-sectors such as components and devices, control and instrumentation, and telecommunication products to major markets like Singapore and Hong Kong. Meanwhile, weak orders from their principals have weighed down on major PH exporters of Non-electronics such as machinery and transport as well as agri-based exports (e.g., sugar and coconut). Similarly, our exports of wood manufactures continue to be hounded by weak orders from the principals of major PH exporters.

Backed by robust domestic demand, firms are finding more lucrative opportunities to sell in the local market. For example, a quick check with a major producer of shrimps and prawns revealed that they stopped exporting and instead concentrated their sales and distribution in the domestic market. This can partially explain the 22% decline of our exports of shrimps and prawns in the first quarter of 2019.

Additional feedback from major players revealed that our exports are hampered by lingering issues they encounter on costs and inefficiencies in transport and logistics. This continues to slow down the turnaround time in the production and shipments of exporters.

Supply issue has affected export mainstays such as fresh and processed mangoes: season is delayed and shortened due to double whammy of La Nina last year during flowering season and El Nino this year.

In the case of chemicals, there remains the lingering issue of the policy concerning controlled and regulated chemicals, which hampers the turnaround time of our exporters from production to market.

As part of our action plan, we are prioritizing addressing the core issues above (i.e., supply, competitiveness, port operations/logistics, and infrastructure gaps (e.g., R10 is now operational, etc) with relevant government agencies consistent with the Philippine Export Development Plan.

We are continuously working on diversifying our export offerings and destinations. In particular, we are looking at focusing our promotional efforts for the following products and services, among others which we consider as export growth drivers: office equipment, consumer electronics, motor vehicle and motor vehicle parts, high-value coconut products (e.g., MCT coconut oil), forest products (e.g., plywood, fiber board, etc.), and wearables (e.g., footwear, handbags, etc.). On services exports, audiovisual / creative industries (e.g., film, animation, game development), healthcare information management systems, software development, and tourism-related services will receive more focus.

DTI is also pursuing trade initiatives to increase exports to trade partners to help increase exports.  Based on recent negotiations, Indonesia has revoked anti-dumping on bananas and allowed for the exports of shallots.  They will also invest on coffee manufacturing and processing.  There are also talks with Singapore on importation of more agricultural products like fresh fruits and vegetables, meat and poultry products.  DTI is also maximizing opportunities under existing preferential trade agreements with ASEAN, China, Japan, South Korea, India, Australia and New Zealand, India as well as with EFTA countries. We are also promoting more products to the US and EU to expand utilization of their GSP schemes.

Trade promotional efforts are also being done on the non-traditional markets in Russia, Africa, Latin America and South Asia.   These markets are expected to experience high economic growths and with their huge population can provide for alternative export markets in the near future.

The DTI, together with other government agencies are already trying to provide solutions to these issues, consistent with the strategies laid out in the Philippine Export Development Plan (PEDP). Notwithstanding, from the 2018 total export level of US$89 B, we remain confident that we are still on track in meeting our total export targets to reach a range of US$ 122 to 130 B by 2022. We expect a positive growth trajectory to set in in the subsequent quarters.

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