Trade, investment hopes spring in 2012

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The Department of Trade and Industry (DTI) will likely end 2012 on a happy note as officials welcome improvements from last year as well as optimism going into the new year.

Merchandise exports benefited from a low base and the absence of major supply chain disruptions similar to the triple disaster in Japan and the flooding that hit Thailand in 2011. Robust shipments helped the economy expand in terms of gross domestic product (GDP), which economists expect to hit about 7 percent this year.

“People thought I was crazy when I said before that GDP could hit 7 percent,” Trade Secretary Gregory Domingo told the Inquirer in an interview. “And yet, here we are, with 6.5 percent GDP in the first nine months, growing exports, and high investor interest.”

Government wants the economy to grow at an average yearly rate of 7 to 8 percent to curb poverty.

Merchandise exports are expected to breach the record $51.4 billion set in 2010, and may even reach up to about $52 billion from last year’s $48 billion, Trade Undersecretary Cristino Panlilio said in a separate interview.

Interestingly, Panlilio said, growth comes despite the flat performance of electronics, which make up nearly half of outbound shipments. This means growth is largely coming from non-electronics exports, particularly agro-industrial products.

It may take officials until February to consolidate and publish exports data, but Panlilio is confident that sales of most Philippine merchandise, including fruits, coconut oil, and sugar will hit a new record.

Cumulative merchandise exports for the first ten months of 2012 grew by 7.1 percent to $44.475 billion, from the $41.532 billion posted in the same period last year, according to the National Statistics Office.

Going into 2013, trade officials also expect fresh investments as they follow up on inbound missions—business trips comprising 5 or so companies—from various countries. Such missions may reach 35 by the end of December 2012, Panlilio said.

There were 18 registered in 2011, according to DTI data.

Among the notable missions this year came from Russia, France, Italy, Turkey, and the United Kingdom.

“The key factor is, if the markets will absorb more of our exports,” said Sergio Ortiz-Luis, Jr., Philippine Exporters Confederation president.

Part of DTI’s strategy to boost outbound shipments is to educate exporters and would-be traders on how to benefit from free-trade agreements (FTA).

A free-trade agreement is a deal between two or more countries to eliminate or reduce tariffs and other requirements that restrict trade among nations.

The DTI’s Bureau of Export Trade Promotion (BETP) and the Philippine Trade Training Center facilitate the seminars.

From January to October this year, the DTI conducted 95 seminars on FTAs, trade standards, and even product design preferences of consumers in target markets.

The Philippines’ participation in trade agreements aids 55 percent of exported merchandise, BETP director Senen Perlada said. Among these are food and beverages, jewelry, appliances and electronics, furniture, handicraft, cosmetics, agro-industrial products, and chemicals. Presently, the Philippines has FTAs with the Asean, China, Japan, Korea, India, Australia and New Zealand.

Customs brokers, BPOs, and the academe also benefit as they provide linkages and services, Perlada added. Next up for seminars are professional groups for medical services, engineering, education, and accounting, among others, ahead of inter-country talent exchange when the planned Asean Economic Union is formed in 2015.

Also to help exporters, the DTI reopened two pavilions at the PhilTrade Center, a major export promotion facility in the 1980s that had fallen in disrepair due to ownership changes over the years. The pavilions have become permanent showrooms for exports under Citem (Center of International Trade and Expositions) management. Exhibitors do not pay rent but have to pay for operating cost, electric power (for air-conditioning and such), maintenance, utilities, and manpower (including janitors).

Meanwhile, a number of pending issues have to be addressed next year to further propel trade, industry group leaders said.

Mining, the total log ban, and smuggling are among the crucial ones, said Jesus Lim Arranza, Federation of Philippine Industries chair.

“The government passed mining reforms and yet everything is pending without supporting legislation on revenue sharing. We have failed to take advantage of high metal prices,” Arranza said in a phone interview. “On the total log ban, it was not successful, and it only hit those that were legally into wood production. Most of all, smuggled plywood abounds, which brings me to the third top issue for trade, in my view: smuggling. We’ve been talking about smuggling of rice and other agricultural products, but there is still an influx of technically smuggled [goods].”

For trade to prosper, these issues need to be resolved next year, Arranza said. Confusion over the primacy of national laws against local ordinances also have to be resolved so that investors are not hampered from doing business, especially in high-risk industries such as mining, he said. Such investments are needed since the economy cannot simply depend on remittances and government and household spending.

Also, the Philippines’ investment climate still has many kinks that need to be ironed out, apart from the obvious confusion that now affects the mining sector. Problems include conflicts in implementing the Local Government Code, Ortiz-Luis said.

Then there are issues on double taxation, discouraging both local and foreign investors, he added. The high cost of doing business, lack of access to cheap credit, and research and development have also hampered trade this year, with government even authorizing its agencies to further increase fees (under Administrative Order 31) starting January 2013, he said.

With the Philippines having mixed results in various competitiveness studies, National Competitiveness Council private sector co-chairperson Guillermo Luz said that there is now a concerted effort with government agencies to fix high-impact kinks, including business registration and tax-related processes.

“We are optimistic that this level of cooperation and coordination among government agencies and the private sector will yield positive results and, hopefully, an improvement in our rankings in this report in the years ahead,” Luz said via email.

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