Good business for 2013 (Conclusion)

As January comes to an end, we also wrap up this four-part series on business for 2012 as well as outlook for 2013 for the different business sectors.

We were able to get insights and perspectives from the following industries in the earlier columns: Part I: Philippine Coffee Board, Philippine Chamber of Commerce & Industry (PCCI), Meat Importers & Traders Association (MITA) and Semiconductors & Electronics Industries of the Philippines. Part II- Philippine Wood Producers Association of the Philippines, Association of Vehicle Importers & Distributors (AVID), Chamber of Real Estate & Builders Association (CREBA) and Federation of Philippine Industries (FPI). Part III- Board of Investments (BOI), Rural Bankers Association of the Philippines (RBAP), United Broilers & Raisers Association (UBRA), and Chamber of Automotive Manufacturers of the Philippines (CAMPI).

The country’s furniture manufacturers were a little more upbeat in 2012. Where the two previous years were marked with closures of furniture export companies and a marked decline in buyer traffic, there was some breathing room and a slight increase in sales in 2012, though exports remained relatively poor.  What saved the industry was domestic sales and increased interest from foreign buyers due to the three major shows they staged last year. Many foreign buyers who have not set foot in the country decided last year to attend the combined Manila-Cebu-Pampanga furniture show in March.  According to Mr. Nikolas de Lange, president of the Chamber of Furniture Industry of the Phil. (CFIP), “they were very shocked to see how the Philippines has put on a very good show…they are expecting a lot more in March 2013..”

Their biggest challenge in 2012 was the wood ban when wood prices went up, production costs escalated, and hard wood was difficult to source. They are negotiating with the government to simplify the importation process, eliminate the red tape which would effectively lessen their costs. Mr. de Lange cited, “In March 2013 the European Union is starting a new system that will not allow retailers in the EU to sell wood products that cannot be proven to be sourced legally.”  He hopes that the Philippines will adopt the same system so legally sourced wood can still be sold here. The association is fast-tracking a system so show buyers in Europe can see that our plantation species (which are allowed to be sold here) are not illegally sourced. Many of our neighboring countries, though, are way ahead of us in terms of certification programs, chain of custody programs, etc. which could make buying from the Philippines a lot easier.

2013 should be a good year for them, CFIP says, especially now that they are taking a second look at the domestic market. “We actually import more furniture (at $300 million) than we export ($200 million), but the domestic demand should be higher now, what with the continuing real estate boom and the upcoming huge gaming centers.”

From Philexport – Mr. Sergio Ortiz-Luis and Ambassador Donald Dee, we gathered that for 2012, their target was a growth of between 9 – 10 percent. The months of September and October had dismal results, so the more realistic figures were pulled down to 7-8 percent.

For 2013, their projection in the export development plan is better at 11 percent. By 2016, they are projecting to double the export sales from P60-billion to P120-billion.  “In order to do this, we may have to adjust our targets for 2013 up to 2015 to 14 percent per annum.”

We come now to the beleaguered plastic industry. The new president of the Philippine Plastic Industry Association (PPIA) Mr. Peter Quintana disclosed that as of their latest count, we already have 112 cities and municipalities that have passed ordinances or regulations that either totally banned plastic or shifted to biodegradable plastic. The plastic bag sector had previously reported a 20 percent slump in sales, and for 2012, they surmise that this could go up to 50 percent, both for the plastic bag and the polystyrene sectors.

It cannot be denied that the industry is slowly being killed, and Mr. Quintana says he hopes “more local governments will look at the bigger picture,” meaning reconsider the total ban and consider shifting to biodegradable plastic as a viable alternative. The association hopes too that the citizenry will be more educated in their attitudes towards littering and recycling “which is easier than the quick fix of banning.”

Even the recycling industry is also having a difficult time, he says, because most of the recycled products like hoses and pipes are being used for irrigation purposes, so there is a serious shortage of materials. 

With the election season coming, they are hopeful for a better 2013 for their industry. From the government, they hope that the Senate will pass the Segregation Law and the Solid Waste Management Act, plastic regulation will be more rationalized, and the cost of doing business (energy, labor) will ease up a little.

The next industry is closely related to the plastic sector. From the Packaging Institute of the Philippines (PIP), we learned through the association president Mr. Joseph Ross Jocson that 2012 was a very good year for them. Incidentally, the PIP was established in 1967, making it the oldest association of related sectors in this industry namely plastic, tin cans, corrugated boxes, paper industries and flexible packaging.  As can be expected, the plastic sector was undoubtedly the biggest loser, with paper emerging as the biggest winner. The tin can sector performed well, while the corrugated boxes sector continues to grow.

He bewailed the steep reduction in man hours and production capacity in the plastic sector, but what intrigued me was his claim: “Who benefitted from this, it’s not the Philippines because most of these (paper products) are imported..we do not have a big paper supply here because of the log ban..it is the foreign companies who are benefitting from this and not the Philippines.” He cited Thailand and Indonesia, and cited the white paper board which is now replacing the banned styropor used for fast food chains and which is imported from China.

Mr. Jocson also cautioned that the Asian Free Trade Agreement which grants duty-free benefits to big manufacturing countries like China poses  disadvantages to local industries.

And lastly, the Philippine Franchising Association (PFA): another banner year in 2012. The best performers were the pharmaceuticals, the education sector, health care and tourism. The food sector continued to grow, though not as dynamic as in previous years. This we gathered from the chairman emeritus of the PFA, Mr. Samie Lim who also said that quite a number of retail stores have come out last year.

For 2013: “I think the thing to watch out for in 2013 are the convenience stores..7-11 is poised to open 100 stores in the Visayas/Mindanao area…Mini Stop is catching up..” Ayala has joined the fray and is set to open the Family Mart which, according to Samie is the second largest chain in the world in this sector.

Also for 2013, medical tourism and the beauty sector will come in very strongly, very soon. If our economy continues to grow, it provides us an opportunity to bring in the European brands, especially now that Asia provides a good option to Europe’s continuing economic decline.

The challenges he cited are: 1- salaries continue to rise but productivity is not catching up;  2- rentals have shot up and it has become a big problem, and 3- power costs are still prohibitive, though he doesn’t see brown-outs happening this year. 

Franchising in the Philippines will continue to grow, he says, and this year’s franchise show on July 16 - 19 should validate our claim that the Philippines has the largest franchise show in Asia.

Mabuhay!!! Be proud to be a Filipino.

For comments: (email) businessleisure-star@stv.com.ph