Unstable peso stunts export sector recovery

CEBU, Philippines - Although the export sector had seen a bit of consumer recovery in the United States at the start of the second semester of 2010, the players were not able to enjoy the supposedly anticipated development due to currency instability.

Apparently, the year 2010 was the benchmark year for the export industry, especially for furniture, gifts, toys, and housewares, fashion accessory, among others to see the start of the recovering market outside the Philippines, but the unpredictable movement of the peso versus the US dollar, has made it more difficult for exporters to re-start its gear right.

Gifts, Toys and Houseware Exporters Association (GTH-Cebu) past president Jenifer Cruz said that unless the Bangko Sentral Ng Pilipinas (BSP) will properly manage the foreign-exchange movements, exporters will remain battered by the fact that they can not expand, and take advantage of the recovering export market.

“Buyers will continue to buy. There is an improving market, although consumers are now more conservative than before. But with the strengthening of the peso versus the US dollar our bottom will suffer. No money to expand and market our products abroad,” Cruz told The Freeman yesterday.

According to Cruz, despite the industry’s constant call to BSP to intervene the movement of the foreign exchange to protect the dollar earning industries, still exporters specifically are suffering with too many issues.

“We are running out of ideas and we hope that there will be a regional effort from among the central banks in Asia to counter this issue. Exporters in Asia are also affected except for China and Vietnam,” Cruz said.

Cebu export sector registered negative growth, in terms of FOB (Free-on-Board) export value from US$50 billion in 2008 to US$38 million in 2009.

This year, although the export value have surge a little bit, exporters are also losing money because of the volatility of foreign exchange.

“Our main problem this year is no longer the market, because it is improving, but the stability of the Peso. We become less competitive with our Asian neighbors,” said exporter Eric Ng Mendoza.

While the furniture sector is still experiencing sluggish market recovery, and added by the currency problem, the national players have decided to join their hands in saving the sector.

In October of this year, Cebu and Manila furniture makers inked a joint promotional campaign to attract buyers all over the world.

The Manila-based Chamber of Furniture Industry in the Philippines (CFIP) and the Cebu Furniture Industries Foundation Inc. (CFIF) are now joining hands to promote the two, international furniture and furnishing exhibitions next year--the first time being done by industry players in the recent years.

The two international furniture exhibitions in the Philippines, the “Manila Now” and the “Cebu Next” will pool their resources in inviting foreign buyers, such as buyers’ directory sharing, as well as financial support.

“The Furniture export in Manila is drying up. I don’t know with Cebu. We are no longer the ‘darlings’ of the export industry now, it already moved to BPO and talent-based services,” said Eduardo Zuluaga, chairman of “Manila Now 2011.”

Zuluaga admitted that the industry players have decided to put their previous conflicts aside, and moved to save the life of the industry, as it now on its critical condition.

“When times are bad, we have no choice but to unite,” said Zuluaga referring on the earlier conflict between the CFIF and CFIP on the issue where to hold a one international furniture show whether in Cebu or in Manila.

Instead for wallowing the unproductive rift, Zuluaga said CFIP and CFIF are now sharing their resources to stimulate interest from foreign buyers, while furniture exports have continue to weaken.

“We are talking on areas where can cooperate,” Zuluaga said adding that one obvious problem is how to entice foreign buyers to come and “bring their wallets” with them.

Meanwhile, in the fourth quarter of this year, while the export sector has been pleading the BSP to control the wild movement of the Peso, the industry-wide players including Mandaue Chamber of Commerce and Industry (MCCI), Cebu Business Club (CBC) and Cebu Chamber of Commerce and Industry (CCCI) offered their help to formulate a joint position paper to be submitted to BSP in changing the monetary policy of the Philippines, for the sake of the dollar-earning industries.

The PhilExport-Cebu also have introduced several programs to sustain the life of the export sector despite the long-over-due battle such as re-introducing the hedging mechanism, and other alternatives and ideas to cope with the competition.

Luckily, though despite the problems encountered by the export sector this year, no more companies had adopted retrenchments or temporary plant shutdown. In fact, PhilExport-Cebu executive director Fred Escalona said some companies have increased their volume order to subcontractor firms.