Philippine export industry to slow down in 2011

The recovery of the Philippine export industry this year is expected to remain at double-digit level but would decelerate in 2011 to a slower pace.

In the draft three-year export development plan, the Export Development Council (EDC) had targeted the sector’s growth at 13 percent a year for the planned period.

The National Economic and Development Authority (NEDA) also sets the same growth target for exports in 2011.

The 2011target is considered modest in the heels of a 37.2 percent growth in exports from January to October this year reflected in the latest trade figures released by the National Statistics Office (NSO).

Ten months of commodity export revenues in 2010 totaled US$43 billion, over $11 billion higher than exports for the same period in 2009 at $31.39 billion. It was a quick recovery from a negative 28.9 retreat in 2009 as a result of the global recession.

With hefty growth in the importation of electronics components and machine parts in October, the high growth path is seen to be sustained until the end of this year when full recovery of the sector is seen to finally equal, if not exceed that in the peak export revenues of $51 billion in 2007.

Raw material imports jumped 36.6 percent in October, while capital goods for expansion kicked up by 32.1 percent, the NSO reported.

The strong peso is however expected to bear down on the sectors sustainable growth, explained Sergio R. Ortiz-Luis, Jr., EDC vice chairman and head of the Philippine Exporters Confederation, Inc. (PHILEXPORT).

Economic planning chief Cayetano Paderanga, Jr., on the other hand, saw a volatile exchange rate as just one of the threats to the sustainability of export growth in the coming years.

He pointed out a fragile global economic condition, shaky fiscal conditions locally, higher oil prices, rising consumer prices, ill effects of weather disturbances and a narrowing source of investments among the risks to hefty export growth.

Paderanga further pointed out the need for the Aquino administration to adopt measures to reverse the country’s deteriorating competitiveness compared to its ASEAN neighbors including Vietnam, Thailand, Malaysia and Indonesia.

Philippine airfreight industry grows 20% in 2010

The Philippine air freight industry posted an estimated 24 percent growth in 2010 compared to 2009.

 “Although it is difficult to predict a trend, the industry has been volatile for the past years. Due to the global economic crisis in 2009, the demand and movement of goods were minimal,” said Rosemarie Rafael, president, Airspeed International.

“Buyers do not like to hear the word ‘airfreight’ and would avoid it as much as they can as a norm.”

“To the buyers, airfreight is done only when production is late or goods are needed at a fast interval such as electronics or perishables.”

Rafael noted that when economic trading is high, distribution and forwarding of goods are also high. “It is directly proportional. For us, we are pretty much dependent on the economic trends of the countries we do business with.”

“For 2010, stores have to replenish their inventory and the demand for goods and services have grown from the 2009 levels.  As such, the airfreight Industry had also experienced growth and a slight recovery but still not to the level of 2008.”

Security is one of the major challenges of the airfreight forwarding industry. As a result of attacks on 9/11, airlines all over the world had immediately implemented very strict security measures which do cost time and money – there is now what is called “security surcharges” to cover the costs of these security measures, said Rafael.

Other challenges would include cost of airline fuel. Fluctuation of the fuel price had to be addressed by the airline industry so much so that there is now what is being called a “fuel surcharge.”

The implementation of fuel and security surcharges had made air cargo very expensive. Shippers and consignees now resort to move most of their cargoes via ocean or thru multimodal transport to make the landed cost of their goods affordable to the market.

Industry leaders are now challenged in ensuring that with all the recent developments, the impact on the forwarders, shippers, importers and other stakeholders in the industry will be controlled and minimized, considering that the volume of transactions had gone down and margins are minimal, said Rafael.

“The government could assist the industry by eliminating or minimizing corruption within their ranks especially government agencies involved in this industry.”  

“This will allow the industry to minimize their cost of doing business.  Second, the government can work on being able to attract more airlines to come in and thus providing more options and airline space for the airfreight forwarders.”

On the  global arena, John Manners-Bell of Transport Intelligence (Ti) noted that the global logistics industry saw a strong bounce-back in 2010 as it emerged from recession.

Air, road and sea freight sectors recovered dramatically in 2010. “Although this growth moderated as the year went on, many metrics suggested that the industry had recovered to pre-recession levels.”

Bell said the upturn in freight volumes and the measures which carriers had taken to reduce capacity had a significant effect on freight forwarders’ gross profits although the extent to which this occurred varied from sector to sector.

“Air freight capacity was particularly tight and rates have continued to rise throughout the year whilst sea and road transport markets have been much softer.”

Bell said the industry was buoyed by economic expansion in China and South East Asia and if it hadn’t been for concern about the ailing economies of the eurozone and the massive deficits of other Western powerhouses, such as the USA and UK, confidence surely would have been higher still.

Asean shipowners oppose ITF model wage scale

The Federation of ASEAN Shipowners’ Associations (FASA) has expressed opposition to the unilateral decision by the International Transport Workers’ Federation (ITF) to establish an ITF model wage scale, a benchmark on minimum wage for non – domiciled seafarers employed on national flag vessels.

In a recent general membership meeting, FASA viewed this initiative as a strong attempt by the ITF, a non-governmental organization (NGO) to unilaterally dictate a minimum wage scale on national flag vessels and which it opined is a clear violation of national policies.

“The underlying intention of this move by the ITF is also viewed as an attempt to force an increase in the International Labor Organization (ILO) minimum basic wage rate for able seaman,” said FASA.

 As the shipping industry has not fully recovered from the impact of the recent global financial fallout, and in light of a potential surge in crude oil prices, FASA is strongly against any impending move by any international seafarers employers’ organization to enter into any direct negotiation with the ITF on any future increase in the ILO minimum wage rate.

FASA stressed that any such increase will put additional stresses on the financial strength of the shipping industry.

Following concerns about climatic changes and rising sea levels, FASA has reiterated that protecting the marine and air environment is one of the primary concerns of the shipping industry.

FASA members have pledged to work together to bring about reduction in greenhouse gas emissions from international shipping.

It also noted with concern a revised accounting standard proposed by the International Accounting Standards Board (IASB) that will remove the distinction between finance and operating leases, forcing owners that charter in tonnage to record period time charters as finance leases and place them on their balance sheets as liabilities – such a standard may force owners into breach of covenant with their lenders and impact on owners’ credit ratings, equipment financing strategy and forecasting models, thereby restricting owners’ flexibility and ability to maneuver.

FASA is of the strong opinion that the proposed revised standard should not be supported as the proposed changes may not achieve the desired effect of comparability but could instead lead to misleading information being provided as well as place a significant burden on the shipowning and ship chartering industry.

FASA chairman Johnson Sutjipto thanked all the FASA members for their strong support and cooperation.

He also urged members to continue and serve the federation with full dedication in the interests of ASEAN shipping.

Sutjipto expressed deep appreciation for the strong confidence and encouragement accorded to him in 2010 and agreed, with the full cooperation of all members, to continue promoting FASA as a voice for ASEAN shipowners.

Philippines to benefit from new EU rules of origin

The Philippines is one of the developing countries to beneift from the new rules of origin (ROO) under the European Generalized System of Preferences (GSP) that would take in January 2011.
Certificates of origins are international trade documents that attest that goods in a particular export shipment are wholly obtained, produced, manufactured or processed in a country of origin.
Every country considers the origin of imported goods when determining what duty will be assessed on the goods or, in some cases, whether the goods may be legally imported at all.

The ROO in the fisheries sector have been simplified and relaxed. It eliminated the current crew requirement for vessels conditions.

The European Union (EU) likewise relaxed several conditions particularly involving textiles and agricultural products which could benefit especially the poor countries.

For textiles, least developed countries will need just a single transformation instead of the previous double transformation.

An important effort of simplification has also taken place in agricultural goods. For instance, limitations on the use of sugar have been reduced, permitting up to 40 percent in weight of non-originating sugar instead of the previous 30 percent in value.

However, some new limitations have been introduced in very concrete cases like the use of dairy products.

“This reform will help developing countries to make the most of the trade preferences so that they do not lose out because of unnecessary red tape,” said Karel de Gucht, European Commissioner for Trade.

“We expect the new rules to give a big boost to the economies of the world’s poorest countries,” added de Gucht. 

Under EU’s proposed new set of rules, cumulation is possible within the already existing regional groups like ASEAN and South Asian Association for Regional Cooperation (SAARC) as well as the newly added Southern Common.