Traders: Better prospects in second half of year

The export industry expects a flat growth rate this year ending at a negative 0.83 percent as of August this year while 2014 second to the fourth quarters could show strong recovery.

Philexport Cebu executive director Fred Escalona’s forecast for this year is similar to last year because the industry did not grow nor did it shrink.

“It’s either a drop or a flat growth considering that 2012 was also bad for the industry. I think we will hit between flat growth and an increase of one percent,” he said.

Escalona said that this is caused by “spattering” recovery in the traditional major markets like the United States of America, Japan and Europe.

First Eight Months

As of August last year, three major sectors with presence in Cebu showed a decline. Electronics with a 15 percent decrease; garments and textile with an 11.89 percent drop; and shipbuilding falling by 23.67 percent.

Wearables, fashion accessories, bags, shoes and jewelry, however, showed the highest jump with 129.07 percent growth with $102.03 million in total revenues from January to August compared to only $44.54 million in the same period in 2012.

“Food, mainly processed, including beverages, fresh, marine and aquaculture and coconut did well, along with wearables and furniture — which did well in the first three quarters of 2013. Food, being a necessity, registered an average increase of 39 percent. Probably the slight increase in consumer confidence in countries we trade with might be responsible for the 129 percent increase in wearables and 25 percent in homestyle (furniture, decors and giftware),” said Escalona.

Most of the growth registered between the second and third quarters.

The two calamities — Oct. 15 earthquake and supertyphoon Yolanda in November, did not directly hit the industry’s deliverables. This is because orders had been placed ahead of October. Escalona said, adding that the impact may register in the first two quarters of next year.

“We expect to pay the impact on the first two quarters and it will be a negative impact as the areas hit by the two calamities are major sources of raw materials,” said Escalona.

2014

The prospects for the first half of next year are grim. However, the second half could trend better but may not be enough to cushion the sharp drop in export sales. Electronics could reverse its almost year-long decline according to Escalona.

“The devastated areas in Central Visayas could mean more expensive raw materials. There could be importation of raw materials, an expensive option.”

Escalona said that Bohol provides raw materials to exporters in Cebu which could mean a supply chain challenge for the exporters starting next year.

Leyte’s coconut supply which was badly hit by the typhoon will also pose supply challenges, especially as we are already exporting coconut water and other coconut products.

The next three quarters hold a lot of promise as the economy of Germany, the leading economy in Europe, and the United States of America already show a positive trend.

“They’ve been growing in the past months, no longer negative and the growth is steady. That’s a positive development for the exporters,” said Escalona.

Because of this development, Escalona said that exporters should start preparing for the recovery.

Escalona however said that 2014 is the time for exporters to really define their niché, shape up to compete, and get ready for the ASEAN Economic integration by 2015.

Subsidy

Aside from depending on the traditional markets to help the industry, Escalona said he is hoping that the government will revive the export support fund especially in the promotions side as the industry will need some substantial subsidies when they will attend fairs abroad.

Exporters will need a sustainable marketing program through market studies and export coaching, market diversification or understanding how to be successful in emerging markets and creation of new market space to remain competitive.

Going Local

Escalona said that it was good for some sectors like the furniture-makers to quickly tap the local market as it helped them a lot in sustaining their operations until their traditional markets recovers.

“The furniture-makers are thriving because they were clever enough to switch their focus to the domestic market which has grown with all the hotels and other constructions going on,” said Escalona.

He added that it is also a good move to establish their presence in the local market especially with the economic integration of all ten member countries in the ASEAN region barely two years from now.

Cebu’s revenue-generating exports includes furniture, food, minerals like copper which according to Escalona should further be promoted to other markets outside of the traditional markets to see more growth in Cebu’s export industry.