Neda: New exports tack needed amid weak trade

Export receipts continued to dip for the 14th consecutive month in May because of weak global demand, raising the need to refocus export strategies of firms, the National Economic and Development Authority (Neda) said. 

The Philippine Statistics Authority said exports declined by 3.8 percent year-on-year in May to $4.7 billion, as export of all commodity groups decreased.

Exports of agro-based products fell by 29.4 percent, mineral products by 13.6 percent, manufactures by 0.5 percent, forest products by 82.6 percent, and petroleum products by 33.4 percent. However, this was a noticeable easing off since the 15.1-percent decline in March, or just two months before.

“The growth of exports is expected to remain for the rest of 2016, with the slow recovery of the global economy. Given the soft demand, export-oriented firms may need to refocus their strategies to consider non-traditional markets, which have shown healthier appetites in recent months,” Socioeconomic Planning Secretary Ernesto M. Pernia said.

He cited, for instance, the growth of exports to European countries. Exports to France and Switzerland grew by 37.8 percent and 72.0 percent, respectively, for the first five months. On the other hand, exports to traditional markets, such as Germany and the Netherlands, declined by 18.8 percent and 10.6 percent, respectively.

“It would also be important to increase the flexibility of export firms to cater to the domestic market, given robust domestic demand. We also need to keep government spending on track to ensure that domestic demand continues to provide a cushion to mitigate the impact of the country’s weak exports growth,” said Pernia, who is also Neda director-general.

In terms of export markets, Japan, at 22.1 percent, remained on top in May, with exports growing by 1.5 percent for the month and averaging 1.3 percent for the first five months.

Meanwhile, among the seven selected Asian economies, only Vietnam posted positive export growth of 4.9 percent in May, although it’s lower than the previous month’s 7.5 percent.

Traders have identified specific non-tariff measures (NTM), which they consider obstacles to export and import flows that undermine the competitiveness of domestic industries.

The list of NTMs most prevalent and harmful for certain business segments is contained in a report by the International Trade Center (ITC), based on the outcome of focused group discussions (FGD) held with major segments of Philippines industry. ITC officials unveiled the findings at a roundtable meeting in Makati City recently.

NTMs are defined as policy measures other than ordinary customs tariffs that can potentially have an economic effect on international trade in goods, changing prices or quantities traded, or both.

For the garment sector, the main issue is complying with local content for certificate-of-origin requirements so as to fulfill rules of origin under the recently renewed generalized system of preference (GSP) agreement with the European Union (EU), and the prevailing GSP agreement with the US that expires in 2017.

Garment makers also voiced concern over exports to the US for products that have leather, shell, or endangered wildlife components requiring an Exporter’s Commodity Clearance certificate from the Bureau of Animal Husbandry or the Bureau of Fisheries and Aquatic Resources (BFAR).

The paper also cited a hat exporter on the company’s difficulties in complying with Australian prerequisites: “Australia requires Australian Fumigation Accreditation Scheme (AFAS)-approved fumigation treatment of methyl bromide for exported products. I pay around P30,000 for testing, marking and supervision of the fumigation treatment.”

A future concern for apparel producers is the looming Trans-Pacific Partnership agreement, which the Philippines has not signed, but which Vietnam, a country that dominates garments exports in the region, has.

The agri-food sector, meanwhile, lamented the lack of local testing facilities and product certification available in the Philippines, thus, requiring them to ship goods to accredited testing companies abroad.

They also cite halal certification, customs processing ordeals, the Food and Drug Administration’s (FDA) accreditation and export clearance, and health certification under the BFAR as being “highly bureaucratic and subject to frequent delays, from three months to a year.”

Exporters in regions like Cebu or Davao mention additional layers of administrative red tape from regulating agencies based in Manila, such as the FDA and BFAR, when services in the provinces are not adequate.

“Obtaining FDA product certification clearance (Certificate of Product Registration and License to Operate) for export is very difficult. I am based in Region 11, and there are only two persons handling the processing that takes up to three years,” a chocolate exporter told the ITC.

Another issue for agri-food stakeholders is the need to translate documents to European or East Asian languages, and to notarize documents at Middle Eastern embassies.

For plant products, they claim that the Bureau of Plant Industry would ask for “unreceipted inspection fees” and overtime pay during product inspections.

The furniture sector mainly cites requirements by the Department of Environment and Natural Resources for suppliers’ contracts from exporters for the raw materials they use. The exporters say it is very difficult for suppliers to provide them with these contracts that also need to be notarized.

Likewise, furniture manufacturers experience a wide variety of testing requirements for product properties, safety, quality, and traceability certifications. These include the EU Timber Regulation, which prohibits the import of illegal timber and timber products into the economic bloc, and the US Lacey Act, which bans trafficking in illegal wildlife.

“Export requires numerous tests for product quality and performance through Intertek, which costs $100 to $200 per item. This used to be available from the Forest Products Research and Development Institute (FPRDI) for P10,000 to P15,000 but this is closed now and there are no local testing facilities. Other tests include flammability, TBS 117, and prohibited chemicals that can cost up to $5,000,” said a furniture exporter.

The results of the FGDs were included in a study titled, “ITC Business Survey on Non-Tariff Measures in the Philippines, 2015-2016,” conducted in 2015 and 2016 by the ITC, in collaboration with the Department of Trade and Industry.

The study, said the ITC executives, allows Filipino companies to directly report the most burdensome NTMs and the way these affect their businesses.