EVERY $1 spent for export promotions could yield $300 in incremental sales. This is the pitch that the public-private Export Development Council (EDC) used to convince Malacañang and Congress to increase the promotions budget for the export sector.
Department of Trade and Industry’s Export Marketing Bureau (DTI-EMB) Director Senen M. Perlada said this is a simple equation that has also driven other countries to ramp up their promotional activities for their exporters.
But, perhaps due to plain naïveté, the Philippine government is still not taking this route.
So despite the significant strides made by the DTI in promoting Philippine exports abroad, it is still saddled with a considerable hurdle that will hinder locally made goods from penetrating key export markets–lack of budget.
Even with the gradually declining export receipts this year due to instability in the global market, the sector remains a significant contributor to the local economy. In 2014, for instance, export earnings reached $62.1 billion—an all-time high—reflecting a 10-percent growth from $56.7 billion in 2013.
With the significant contribution of exports to the local economy in mind, the government and the private sector came up with the three-year Philippine Export Development Plan (PEDP).
The 2014-2016 PEDP is the export-sector component of the Philippine Development Plan 2011-2016, the government’s primary economic and social development blueprint.
It outlines the export targets and market strategies seen to boost export growth within the three-year period, taking into consideration the problems affecting local and international markets.
Philippine Exporters Confederation Inc. (PhilExport) President Sergio R. Ortiz-Luis Jr., in a previous interview, stressed that a salient point of the PEDP is the export-development fund (EDF), a P1.8-billion allocation from the national government meant to be distributed to the promotions group of the DTI and other promotion units of other agencies.
The PEDP, submitted to Malacañang in December last year, is yet to be signed by the Chief Executive up to now, to the dismay of exporters hoping that the fund could be injected into the national budget by 2016.
Perlada acknowledged that both the government and private sectors see the need for increased support for export competitiveness.
“From the P1.8-billion EDF that was proposed in the PEDP for promotional and marketing assistance across different agencies and not just EMB, we asked for P600 million. That would, hopefully, cover 2015 to 2017. That has been endorsed by Secretary [Gregory L.] Domingo and submitted to Malacañang; but we have no word yet on it,” Perlada said in a recent BM Coffee Club forum.
On the EDF, Perlada noted that the focus of the fund is the creation of the National Quality Infrastructure (NQI), an institutional framework, encompassing both private and public sectors, that formulates, issues and implements standards and sets compliance assessment to improve the suitability of products, processes and services.
The P600 million will be allocated for the creation and implementation of the NQI, distributed among the bureaus involved, such as the Department of Science and Technology and Bureau of Product Standards.
“We’re going heavy on the NQI in the PEDP because we have to strengthen the quality; that’s what we have to improve on,” Perlada added.
For the EMB alone, Perlada conceded that his bureau has been receiving, at most, P42 million for maintenance and other operating expenses, not counting personnel services.
The paltry allocation compels the office to seek support from development partners and other bureaus tasked with marketing assistance for exporters, such as the Department of Agriculture’s Marketing Assistance office.
The minuscule budget may also be the cause of the small base of Filipino exporters that are actively trading, the EMB director added.
To date, the EMB has profiled and engaged 1,250 exporters. The total base of regular exporters is around 6,000.
This is a trifle number compared to Thailand, which has a Cabinet-level agency dealing with export promotions, and which has a total regular exporter base of over 10,000, Perlada added.
“The EMB of Thailand is one department; Cabinet level and reporting directly to the prime minister. We could do more; but right now, we’re just doing what we can,” the DTI official said.
This is significant as the EMB director cited an earlier World Bank study citing the multiplier effect of export promotions on export receipts.
“Across all levels of development, a dollar spent, depending upon the sector promoted, the return is around $ 300 in incremental export sales,” Perlada said.
Incorporating that principle in the PEDP, the EMB official said the P1.8-billion fund, in dollars, only represented 2 percent of the incremental exports they are targeting in the plan.
Market penetration has also been affected by this dearth in financial support.
For instance, the Philippines, Perlada noted, has failed to seize the first-mover advantage in the export of nata de coco in Japan, its largest export market.
“We missed the boat in the sense that there was not enough unity in communicating what the market really wanted or needed. Those were there that took advantage took shortcuts. Our exporters need to know that we should follow the standards,” Perlada added.
“The problem is where they will source the fund. The Neda [National Economic and Development Authority] is now taking a closer look at it, probably a cost-benefit analysis of the plan,” he said.
Even with a shoestring budget, the International Promotions Group of the DTI, the umbrella group of EMB, has sustained its marketing, promotion and information efforts.
As reported in the Philippine Economic briefing, the DTI conducted 179 Doing Business in Free Trade Areas (DBFTA) sessions from January to August this year, already surpassing the goal of 175 sessions. These were attended by 15,615 participants from 5,148 companies, of which 963 were exporters.
The DBFTA are information sessions for small and medium exporters on how to take advantage and use the existing free-trade agreements of the country in exporting their products.
Last year the DTI also conducted 26 Philippine Export Competitiveness Program (PECP) seminars, with attendees counting 1,576.
The PECP is a series of information seminars designed to encourage local companies to join trade fairs and ramp up their product competitiveness.
From January to August, the DTI conducted 21 PECP seminars attended by 1,754 participants. In that period, the export-promotion activities were:
For the last quarter of 2015, the EMB will be setting an outbound export-promotion mission to the Middle East, targeting Jordan, Qatar, the United Arab Emirates and Saudi Arabia, with Philippine companies pushing food, fast-moving consumer goods and personal-care products.
While the EMB is not giving up hope on the approval of the EDF under the export plan, Perlada said the allocated agency budget will have to do—for now.
But the shelving of the EDF may be another hindrance to the already sluggish export performance of the country, mainly brought about by the diminishing demand from China and Japan.
The Philippines’s export sales totaled $5.1 billion in August, a 6.3-percent decrease from $5.4 billion recorded value in August of 2014.
The DTI has already conceded that a 10-percent growth in exports—the government-set target—is already unlikely this year, seeing a 3-percent to 5-percent growth instead.