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Tuesday, February 27, 2024

Philippine exports vulnerable to US-China trade hostilities

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The country exports remain one of the economy’s weakest links despite a modest growth.

ING Bank Manila senior economist Nicholas Antonio Mapa sees them as vulnerable to the ongoing trade war between the US and China.

Philippine Statistics Authority data as of June 2019 showed the country's balance of trade-in-goods deficit shrank to $2.47 billion from a gap of $3.55 billion a year ago, as imports declined 10.4 percent while exports posted a marginal increase of 1.5 percent.

This resulted in the trade deficit of $19.004 billion in the first half, lower than the $19.235-billion deficit in the same period last year.

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First Metro Investment Corp. president Rabboni Francis Arjonilo said due to the global economic slowdown amid the US-China trade war, exports were expected to grow weaker at 2.6 percent.

But imports will continue to outpace exports and are seen to sustain a double-digit growth of 10 to 14 percent due to the strong government spending on infra and private investments.

Data showed total external trade in goods in June 2019 amounted to $14.49 billion, reflecting a decrease of 5.8 percent from the $15.39 billion external trade in the same month of the previous year. 

Of the total external trade, $6.01 billion or 41.5 percent were exported goods and $8.48 billion or 58.5 percent were imported goods.

Mapa said exports managed a third month of modest growth amid the trade war fears, while import compression turned more severe with inbound shipments contracting by double digits.

PSA data showed that the country's total export sales in June 2019 stood at $6.01 billion, reflecting an increase of 1.5 percent from the $5.92 billion total export sales in June 2018.

The PSA noted an increases in export sales of the seven of the top 10 major export commodities, namely, cathodes and section of cathodes, of refined copper (41.7 percent); fresh bananas (24.4 percent); ignition wiring set and other wiring sets used in vehicles, aircrafts and ships (17.6 percent); gold (10.1 percent); electronic products (4.3 percent); machinery and transport equipment (3.0 percent) and other mineral products (1.1 percent).

By commodity group, export of electronic products continued to be the country’s top export with total earnings of $3.54 billion. This amount, which accounted for 59.0 percent of the total exports’ revenue in June 2019, moved up by 4.3 percent from the $3.40 billion export receipt in June 2018.

Components/devices (semiconductors) accounted for the biggest share of 43.8 percent among the electronic products.  Export for these electronic products went up by of 4.1 percent, from $2.53 billion in June 2018 to $2.63 billion in June 2019.

On the other hand, total imported goods in June 2019 declined by 10.4 percent, from $9.47 billion in June 2018 to $8.48 billion in June 2019.

The decrease was due to the decrements in nine of the top 10 major import commodities. These were iron and steel (-40.3 percent); cereals and cereal preparations (-29.4 percent); industrial machinery and equipment (-20.7 percent); plastic in primary and non-primary forms (-16.4 percent); transport equipment (-12.6 percent); telecommunication equipment and electrical machinery (-12.2 percent); mineral fuels, lubricants and related materials (-7.0 percent); other food and live animals (-6.7 percent); and miscellaneous manufactured articles (-0.1 percent).

Among the imported commodity groups, import bills of electronic products, valued at $2.39 billion, accounted for the highest share of 28.1 percent to the total imports.

Mapa said import contraction could also be traced to the delay in the approval of the national budget for 2019 and elevated costs of borrowing. He said inbound shipments faced its steepest contraction

for the year with capital goods, raw materials, energy and even consumer goods falling into the red.

Much has to be done going forward

Also included in the agriculture sector are the diversification into commodities with high market potential and high value adding; impose progressive idle land tax; and pursue the reskilling of workforce in the IT-BPM sector and other labor-intensive manufacturing sectors to

leverage technological advancements in frontier technologies.

Other recommendations include the enhancement of the 4Ps program, full implementation of the Universal Health Care and supplementary feeding, and accelerate the execution of the budget.

He said the Policy Reform Agenda of the government includes the passage into law of the remaining tax reform packages, Budget Reform Bill, amendments to the Public Service Act, amendments to the Foreign Investment Act and Retail Trade Act, national competition policy, the establishment of the Department of Water and Regulatory Commission, National Land Use Bill, and disaster resiliency bill.

On infrastructure, Pernia said the “Build, Build, Build” program remains one of the bedrock strategies that will make the economy grow faster in the years to come.

Under the “BBB”, the government aims to build more roads, bridges, airports, seaports, railways and water and irrigation projects nationwide to further spur economic growth.

Also included in the program is the construction of a subway in Metro Manila that is seen to decongest the metropolis of heavy traffic that has been causing around P3.5 billion in economic losses daily, according to a recent study by Japan International Cooperation Agency.

21 projects completed by 2022

Mapa said the government’s continued push for infrastructure projects would make the country more attractive to foreign investments.

The National Economic and Development Authority said in a report in July that out of the 75 infrastructure projects, 21 are expected to be completed by 2022, while the “remaining 54 projects will be completed beyond 2022, but [whose implementation may begin] during the current administration.”

The 21 projects have a total cost of P187.62 billion, while the cost for the remaining 54 is P2.23 trillion. NEDA, however, did not identify the 21 projects.

As of July 31, the 75 projects have an indicative total investment requirement of P2.40 trillion. Of this amount, P2.01 trillion would be coursed through Official Development Assistance, while P238 billion would come from government funds.

Eight projects would be implemented through private-public partnership, while one project would be a purely private initiative.

Meanwhile, NEDA said five out of 75 infrastructure flagship projects of the Duterte administration will be reviewed due to different concerns.

In a status report, NEDA said one of these projects was the Metro Manila Bus Rapid Transit (BRT) Phase 3 (Bonifacio Global City/Ninoy Aquino International Airport), whose removal from the list of 75 projects was dependent upon the confirmation of the Department of Transportation and the Bases and Conversion Development Authority.

Another project that also faces possible delisting, depending on the DoTr’s confirmation, is the Metro Manila BRT Line 2 (Edsa/Central), about which the NEDA received from the DoTr a letter dated Feb. 27, 2018 that cited the Asian Development Bank in saying “the project may not be appropriate and economically viable, citing highly technical difficulties and considerations.”

Third is the National Power Corp.’s (Napocor or NPC) Agus 6, Unit 4 major rehabilitation project, of which NEDA said that “per consultation with NPC held on March 26, 2018, the project will be included in the scope of the rehabilitation of all Agus-Pulangi Hydroelectric Plant Units.”

The Department of Energy’s Agus 3 Hydroelectric Plant project is also up for review, as it would be funded and implemented by the private sector.

Completing the list is the Department of Public Works and Highway’s Sheridan-J.P. Rizal Bridge project in Quezon City, which was replaced by the Estrella-Pantaleon Bridge project that would connect Makati and Pasig cities.

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