Unstable peso triggers closures in export sector

Some 35 furniture exporters and manufacturers in Cebu have reportedly folded up, leaving behind over 2,000 workers unemployed, due to fierce competition and challenging foreign exchange fluctuation.

Cebu Furniture Industries Foundation Inc. (CFIF) president Michael Basubas said the declining market demand, especially in the United States, and the unstable value of the peso versus the US dollar, including the unfriendly business environment in the Philippines, have caused these companies to fold up since last year.

Basubas however, declined to divulge the identities of these companies.

"Some [companies] cannot keep up with the tough competition," Basubas said during a press conference updating the upcoming Cebu International Furniture Furnishings Exhibition or CebuX to be held this coming February 26 to March 1.

Basubas said the call now is for companies to hold on strongly, and shell out more financial back up for efficiency and improved designing capabilities.

In 2006, the furniture exports in Cebu performance dropped by 2.2 percent from 2005, a slight improvement however, to the negative 5 performance registered in 2004-2005.

There are over 300 furniture exporting companies in Cebu, of which 177 are members of the CFIF.

Basubas said these companies are called to invest and exert efforts to sustain customer-base, while exploring new markets such as Europe, as the demand in the United States is thinning.

"The strength of the peso pushed the Philippine commodities far less competitive in the world market," said Laurie Boquiren, CFIF member of the board.

In the last six years, China enjoyed an average of 29 percent growth, the Philippines' close competitor, Vietnam which was way behind in furniture export before the year 2000, is now reaping an average of 38.6 percent annual growth, and highest performer in all the six Asian countries.

Based on several studies made by international organizations on the State of (furniture making) Sector Report such as the Canadian International Development Agency (CIDA) International Trade Center, CSIL-Milano, the Philippines is slowly lagging behind in the competition, and may lose the opportunity to get its share in the US$210 billion furniture market in the world.

Cebu, which also used to dominate in the Philippine furniture exports with 70 percent of the country's overall furniture sold in the world market, is no longer the situation today.

Cebu's contribution to Philippine furniture export has weakened to only 40 percent now, this means that other regions are also learning to enter this dollar earner industry. The 60 percent furniture exports in the Philippines are shared from different regions including Luzon.

Battered by these problems, Basubas said operating companies have no way to go, but to fight, and spend more. Thus, it has been a "survival of the fittest" for the industry in recent years.

There were a lot of factors that brought down the industry under-water, the makers' unwillingness to invest on plant upgrading and product development and marketing, high cost of doing business in the country, and significantly, the unfriendly trade policies and inconsistent implementation of government regulations, lack financing sources for capitalization among smaller players, among others.