Peza, exporters circle wagons on possible Red Sea fallout

MANILA  —The Philippine Economic Zone Authority (Peza) is working with exporters based within ecozones to mitigate the projected impact of disruptions of the Red Sea commercial sea lane, where conflict is flaring up.

Tereso Panga, director general of Peza, said in a statement on Friday they were preparing for  possible closure or a shutdown by collaborating with the affected registered business enterprises that import and export to and from the European Union and the Mediterranean Sea region.

Panga said such preparations were meant to ensure that the least possible effects would be felt as contingencies were set in place in advance of any major conflict.

Earlier this month, the United States vowed retaliation on the Houthis who are attacking commercial vessels passing through the Red Sea.

READ: How are Houthi attacks on ships in the Red Sea affecting global trade?

The Iran-back armed group had said they would continue the attacks on such ships until Israel puts a stop to its offensive against Hamas in the Gaza Strip.

“We have yet to feel the effects in the Philippines but [we] are pro-actively working together with other concerned agencies to de-risk global supply chains that may affect our locators in particular and the whole economy in general,” he said.

READ: No delays in PH shipments so far despite Red Sea tensions

The Peza chief highlighted the possible impact of the crisis in the marine thoroughfare, where as much 30 percent of global container traffic goes through.

“The closure and shutdown of the Red Sea to trade will make shipping costs 15 percent more expensive and add 10 days for the exchange of goods between Europe and Asia,” Panga said.

“It will definitely affect global trade, delaying production and deliveries of products and resources thereby increasing the cost of goods,” he added.

“The effect of which will be higher inflation in different parts of the world.”

Robert M. Young, president of the export-oriented Foreign Buyers Association of the Philippines (Fobap), earlier warned that industries such as food, agricultural, oil, and fuel will take a hit as the global supply chain gets disrupted.
Fobap ships out around $1 billion worth of garments and apparels from the Philippines each year.

Despite this, Young said that the Red Sea conflict will have a smaller impact on the local textile industry, citing that goods or imports of raw materials for the sector are not taking that sea lane.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., echoed the Peza chief as he sees higher shipping rates and delays to transportation of many goods to as much as two weeks resulting from the conflict.