Exporters cry foul over fund diversion

CEBU, Philippines - The Confederation of Philippine Exporters Foundation (Cebu) Inc., (PhilExport-Cebu) expressed its disappointment on the government’s proposed recommendation to divert the un-drawn balance of P1 billion Export Support Fund to the El Niño calamity fund.

In a position paper, PhilExport-Cebu together with the Central Visayas region export players urged particularly the Department of Trade and Industry (DTI) to abandon its plan to recommend to the Office of Budget and Management, that the un-drawn balance of P1 billion ESF, roughly around P989 million, be re-allocated to the El Niño Calamity fund.

According PhilExport-Cebu the export sector, outside the economic zones, have not yet fully recovered from the effects of the global financial crisis.

“The export sector still needs some nurturing and all-out support in order for it to remain competitive should the global recovery filter down to the small and medium business sectors,” the position paper stressed.

The exporters in Cebu pleaded through the position paper that Export Development Council (EDC) should fast track the evaluation and processing of meritorious project proposals which have accumulated in their hands and have not moved in 12 months.

In late 2008, after the collapse of the US financial system that led to the global economic crisis, President Arroyo approved a P1 Billion Export Support Fund (ESF) as the entire export sector reeled from cancelled orders and bleak prospects ahead.

The fund was established to help exporters to promote their products and build capacity in order for them to be competitive in the global markets that have shrunk considerably.

Although the government had made sincere efforts to help the export industry such as subsidized domestic fairs and other perks, to enable to exporters to unload their unsold inventories, and the leniency in Customs and Tariffs rules, the actual cash released from the pledged P1 Billion support fund amounted only to a measly P37 million (as of March 15 2010), and almost all of it were spent for trade promotion activities.

However, Trade Secretary Peter Favila announced recently that DTI has started adjusting its policy towards export incentives and will recommend “the easing of requirements for exporters seeking tax perks while at the same time will look to discontinue the release of a support fund for the sector” because of the changing economic landscape (improving export outlook).

This announcement has displeased the export sector especially in Cebu, saying “they are yet to recover the painful effects of the global recession.”

In Central Visayas, there are more than 40 SME companies that either shut down or have suspended operations as average sales dropped by at least 50 percent per company.

In the fashion accessories sector alone membership in the FAME Foundation dropped from 140 companies in 2008 to 63 in 2010. The industry sector associations estimate that the crisis may have caused the layoff of more than 150,000 workers in the region mainly in the subcontracting supply and value chains.

Although there is concrete proof that companies are rehiring workers, many of these workers are actually hired on short term contracts as orders from foreign buyers are also booked on short-term basis.