Japanese firms expect higher profit this year – Jetro survey

MANILA, Philippines — More than half of Japanese firms operating in the Philippines expect higher profit this year on the back of an anticipated economic recovery, according to a survey by the Japan External Trade Organization (JETRO).

Conducted in August to September last year, the JETRO survey which covered 133 Japanese companies in the Philippines, showed 60 percent believe their operating profit would be better this year, coming from an expected drop last year compared to 2019.

With regard to business plans until 2022, the JETRO survey showed 34 percent are looking to expand, 57 percent would be keeping the status quo, and eight percent would be downsizing operations.

In terms of employment, one third of the respondents said they would be increasing their local staff this year.

While the pandemic has affected business operations, 68 percent of the survey respondents said they expect the economy to recover this year.

In terms of demand for products, 14 percent said they see an increase, while 43 percent expect it to be the same as pre-COVID.

Among the issues faced by respondents due to the pandemic are decline in orders from clients; static development of new customers; burdensome tax procedures; volatile exchange rate against the dollar; rising wage; insufficient skills and ability of local staff; time consuming customs clearance; and lack of information on rules related to customs clearance.

In response to the ongoing pandemic, nearly half of respondents said they had to adjust their business strategies or models by implementing work-from-home or telework arrangements.

Some Japanese manufacturers also diversified their production base in many countries to strengthen the supply chain.

To help strengthen the overseas supply chains, JETRO is implementing a program with the Ministry of Economy, Trade and Industry of Japan to support Japanese firms.

“As COVID-19 caused functional failures of global supply chains due to the overconcentration of production bases, we are helping Japanese manufacturers to diversify their manufacturing functions in various countries to avoid the risk,” JETRO said.

In the Philippines, JETRO is supporting the following Japanese firms that are investing in capital equipment: Arktech Philippines Inc. (precision sheet metal for semiconductor and medical devices); Taketora Philippines Inc. (medical gowns); Yokoisada (Phils.) Corp. (surgical mask for medical use); Arkray Industry Inc. (electric circuit board for medical testing systems); Sytecs Manufacturing Philippines Inc. (IC chip tray), Sumi Philippines Wiring Systems Corp. (wiring harness for automobiles) and Rohm Electronics Philippines Inc. (thermal printhead).

In terms of how they see the Philippines as an investment destination, many respondents raised concerns such as the unstable policies and problems caused by insufficient infrastructure such as high power cost, chronic traffic congestion, unstable and slow telecommunications, and poor port facilities.