Prospects in the exports of two of the country’s bestsellers in the world market – semiconductors and electronics and garments – look dim due to the prolonged impact of the global slowdown cause by the corona virus disease (COVID-19).
Factories have either shuttered or slowed down as raw materials to support their operations are being depleted.
Dan Lachica, president of the Semiconductor and Electronics Industries of the Philippines Inc. (SEIPI) said the group had earlier projected a 5 percent growth in exports for 2020 “we may fall short because of COVID-19.”
“They are depleting their safety stocks,” said Lachica, referring to the inventory management term on net stocks until the replenishment arrives.
Over 30 percent of imported materials used in semiconductor and electronics manufacturing come from China and Hong Kong.
The industry closed 2019 with $43.3 billion or 61 percent of total Philippine exports, a growth of 4 percent from the previous year.
When asked if SEIPI expects a decline in exports rather than growth this year, Lachica said.
“It depends on when the outbreak will be controlled.”
A report of the Philippine Exporters Confederation Inc. (Philexport) said local garments manufacturers have halted production due to the delay in the delivery of raw materials delayed deliveries from China, Korea, Taiwan and other Asian countries caused by COVID-19.
Robert Young, trustee of Philexport and president of the Foreign Buyers Association, said with the slowdown, garments exporters expect their export earnings to be flat or at most increase by a measly one percent this year.
The Philippines has no local source or backup industries such as fabric, textile and accessories, etc. as every item is imported.
But Young remains optimistic the Philippines would still be in the radar of the foreign buyers.
He said the industry is hoping new investors of garment factories will come in once the proposed Corporate Income Tax and Incentives Rationalization Act (CITIRA) is passed.
The second package of the comprehensive tax reform program, CITIRA seeks to gradually lower the corporate income tax rate from 30 percent to 20 percent over the next 10 years, and rationalize fiscal incentives currently being enjoyed by select firms.
“New factories will come in and then with our advocacy on CSR (corporate social responsibility) and the improvement of the conditions of the factories, I think we will get more orders and somehow, that can attract more orders for the Philippine garments,” he added.
Young also said the recently completed roadmap for the garments industry should lead to the increase of the garments orders.
Young said the United States remains their biggest market this year.
“Right now the GSP (Generalized System of Preferences) is only for the giftwares and all these hard goods. We are hoping that (in) the new GSP come December 2020, we will include the footwear and garments in the US GSP,” he added.
Under the US GSP program, tariffs are eliminated on about 5,000 tariff lines if beneficiary developing countries meet the eligibility criteria established by US Congress. (I. Isip)
