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THE
situation of Cebu’s furniture industry, which has
thrived for decades as a class unto itself in the global
market, is one worth reviewing by those who make
economic policy at the national and local government
levels, and those who want to stay in business in these
challenging times.
According to Wilfredo Rodolfo III’s lead story in this
issue’s
Properties section
, the traditionally exporting
furniture makers of Cebu have seen their sales sputter
as one of their main overseas markets, the United
States, continues to reel from a slowdown. To compound
their problems, the furniture group also must deal with
the three woes of business these days: rising costs of
fuel, raw materials and labor, as the government
responds to inflation by granting workers wage increases
that, in turn, trigger a second-round inflationary
episode.
Thousands of kilometers away, yet another city, also
heavily reliant on exports to the US market, is seeing
sales decline perilously, idling factories and throwing
workers out of jobs. Honghe, some 90 minutes’ drive from
Shanghai, had, for decades, built a reputation as
China’s “sweater city,” producing world-class stuff that
evokes in its residents and workers the same pride that
Cebuanos have nurtured with their exquisitely crafted
furniture.
Cebu
controls more than 40 percent of the country’s
$275-million-a-year export-furniture industry, and has
traditionally looked at markets abroad as it finds the
local demand wanting.
Yet, no
matter how excellent their products may be,
quality-wise, reality has caught up with Cebu and Honghe,
no matter the differences in their context. That is the
reality in a world where the rich have dragged the rest
of the planet to a vision of globalization that promised
boats for everyone, but mostly let the rich ride the
cruise liners while the marginalized stayed in puny,
rickety, easy-to-sink boats.
According to a special report by the Wall Street Journal
that used Honghe as an example of how China’s “export
machine sputters as rising costs shutter factories,”
none have been hit harder by a combination of weakened
markets abroad and tougher rules within (in China’s
case, more stringent labor and environmental standards)
than those companies “that feed the vast global appetite
for inexpensive goods such as toys, household goods,
shoes and clothes.” Honghe is one such boom town built
on export expectations, buoyed by orders from Western
biggies like Wal-Mart—with the risk of such dependency
showing up after the world’s top retailer suddenly
decided to cut its orders.
Making
things worse, Chinese manufacturers have been hit hard
by the impact of the weakened dollar, as contracts are
executed in the US currency. As the dollar has fallen,
says the WSJ report, exporters can barely keep track of
how much they will end up earning—or losing—several
months after the contracts are forged.
This is
the similar lament in the Philippines of the export
sector, especially last year, when exporters and
overseas Filipino workers—pillars of the economy—both
took a hit from the peso’s appreciation against the US
dollar.
The
electronics exporters, especially, were among the first
to hurt.
Yet, as
the Cebu furniture group is showing, setbacks such as
these could be challenges to innovate, or even
opportunities to find new markets and more creative ways
to make money.
For
instance, Cebuano exporters temporarily facing a
slowdown in US orders have turned to the brisk domestic
real-estate industry to stay afloat. “The strong
Philippine economy is a plug in the hole as the demand
from the US continues to slow down,” Eric Casas told
reporters recently, at the sidelines of an expo
organized by the Cebu Furniture Industry Foundation (CFIF),
where he is president. “At present, maybe at most around
25 percent of our production is being pushed in the
local market.”
Local
hotels, condominium projects and private home owners,
the CFIF chief said, are keeping the production lines
going as the industry tries to wait for the US
economy—its biggest customer—to recover, and while its
marketing teams scour Europe and the Middle East for new
markets, according to our Cebu reporter’s story.
And,
while acknowledging that “a combination of these forces
[US slowdown and rising costs of fuel, raw materials and
labor] has dealt this vibrant industry a hard blow,”
Casas asserted “the world furniture market is still a
good market.”
That may
be so, but only if these affected sectors can cope with
the fast-changing scenarios and anticipate any new
problems or complications that breaking developments may
represent.
In
Honghe, one of those sweater makers most affected by the
weaker export market in the United States is quoted as
saying he had thought of selling more of his sweaters in
China, but rued his sparse network with Chinese
retailers. “We’ve always been an export company.” The
Cebuanos, fortunately, seem to have found a local niche
with greater ease.
Different strokes for different folks, but the lesson
remains the same, and everyone in business would be wise
to heed it: in a fast-changing world where risks can
come from any place at any time, the one who adapts best
survives. |
