While German financial giant Deutsche Bank expressed optimism on the Philippines’ manufacturing sector as a key driver to the country’s economic growth, local exporters and export group officials said that the sector’s “renaissance” remains to be seen.
Fred Escalona, Philexport Cebu executive director, said on Wednesday that the sector particularly the export sector were happy with the confidence expressed by these major financial institutions to our economy, however, the sector remained challenged with the continued strengthening of the peso.
“There is always an upside to investment-led growth. However we have to be cautious about optimistic projections especially when the peso is expected to strengthen further. A strong peso may lead to ‘disindustrialization’ and ‘disagriculturization’ at the expense of the manufacturing sector,” said Escalona.
Deutsche Bank also gave this note in their report “Manufacturing: A New Growth Driver” issued last week saying the strengthening of the peso is the key downside risk to the sector’s competitiveness.
According to Escalona, should the peso go at a level of at least P45 and remain there, there is a big possibility that the “renaissance” will happen.
Escalona also cited the favorable labor cost and the government’s move to address the power cost issue.
He also said that Philexport’s assistance program to help the metal working and engineering sectors, the backbone of the manufacturing sector, was the right move especially if the renaissance would happen.
Philexport partnered with the Dutch government to help the sector especially small scale manufacturers in Cebu that could grow into bigger manufacturers capable of handling more projects for global clients.
“We got assistance from CBI Netherlands to strengthen this sector which is engaged in forging, casting, spare parts and machine manufacturing which is the backbone of the manufacturing industry and is at the cross section of the economy,” said Escalona.
However, Eric Ng Mendoza, former Mandaue Chamber of Commerce and Industry president and a furniture and metalworks manufacturer, said that volume orders was still very erratic.
“There are orders coming but very erratic and it would be unwise to claim any trend yet. I have focused on manufacturing specialized merchandise which defined my competitive edge among other manufacturers,” said Mendoza.
Jenifer Cruz of 33.3 Exports, however, said that since January, exporters were seeing a growth in the volume of orders from main markets such as the US.
“I think (what Deutsche Bank reported) is true. In fact, (manufacturers) in Manila are already getting increased order volumes. In our part, we are seeing an increase of 5 percent this year,” said Cruz.
Cruz’s company 33.3 Exports is engaged in manufacturing woven baskets and hampers for different brands that market them in retail shops in the US.
Cruz said competition from Vietnam and China caused a slowdown in their volume orders in the past two years.
But with the increased numbers, he said, this would be an indication that the clients were looking back into the country for their requirements.
Both Cruz and Mendoza cited total cost, which would include cost of labor and power cost, would define the country’s competitiveness, which the government should address.
Deutsche Bank cited the moves to address the labor and power costs, such as the power saving schemes adopted in most parts of the country, and the upcoming implementation of the “open access” to electricity could propel the manufacturing sector to become one of the key economic drivers in the country.