March 29, 2021 at 12:50 am
"We are hobbled by problems with our supply chain."
On top of the pandemic and its terrifying resurgence in the country, which would affect our economy negatively especially the employment and livelihood of millions, we are hobbled by problems with our supply chain.
In part, these problems are also brought about by the pandemic’s impact worldwide. In Europe for instance, on-and-off lockdowns have created massive logistical problems. Ocean-going container vessels have to wait in European ports for delayed land transport, with many truck and lorry drivers unable to report for work. This raises shipping costs due to port demurrage.
Unknown to many Filipinos, the bulk of our pork imports come from Germany, Spain, the Netherlands, even some countries in Eastern Europe, and even as we are experiencing a local supply shortage, imports placed by our processed food manufacturers are delayed.
Worse, a gigantic Evergreen container vessel was grounded a week ago in the Suez Canal, blocking as of Friday, close to 200 vessels from Europe to Asia, and vice-versa. The chain effect on international logistics flow costs billions of dollars, as it seems the removal of the blockade will take much longer.
It is akin to a logjam, as when logs flowing through river to sea are unable to move. The logistics nightmare is no simple matter, and it will result in a likely food supply shortage. The president’s approval of some 350,000 tons of pork imports under the minimum access volume will be subject to the vagaries of cargo handling and shipment problems, even if LCs were opened yesterday.
The Philippines, being a net importer with relatively small volumes of merchandise compared to giants like China and the other developed countries, is hard hit by the logjam. And since many of our locators in the export processing zones depend on imported raw materials and factory supplies, their production lines are greatly affected. The slowdown results in fewer exports.
This does not affect countries like Vietnam and Thailand as badly as our nation. They have land routes to China, which is their biggest supply chain source and also their largest market. Our exporters are doubly hit, first by the exchange rate which eats into their earnings, then the higher cost of imported raw materials due to the logistics crisis.
And we can hardly compete with the rich countries and their huge shipment volumes, with our transshipment ports likewise congested. Shipping costs have thus increased five to ten times.
Sourcing raw materials domestically is not an easy solution either, because our agricultural production hardly suffices for our consumer needs, let alone manufacturing requirements.
The biggest worry at present is in the area of food supplies. With our ASF-affected hog industry, where some 3 million hogs had been culled since the infestation began, and we are now some 400,000 breeders short to produce more pigs, domestic production will take two years to normalize.
This is a logjam like never before and compounds our food security problems. Which is why food inflation is likely to stay high for the rest of the year and may spill over to the next depending on the severity of typhoons and weather disturbances in the latter half of this year.
Economic recovery is also hobbled by the dwindling of our import and export trade.
Exports slid 5.2 percent in January 2021 compared to the same period last year. Imports however decreased even more. Over the last 21 months, total import value decreased by 14.9 percent. Both capital and consumer goods importation continue to decline compared to pre-COVID levels.
Manufacturing supplies, such as fuels and lubricants, steel and plastic resins and capital equipment imports of heavy machinery, transport equipment and other vehicles have slumped continuously, suggesting lower output for the next few years.
We are in a fine pickle, as the Brits would say. One wonders why Senator Manny Pacquiao is raring to become the next president.
As if these were not enough, even our banana industry is going bananas.
Exports are down, with January 2021 exports lower by 51 percent year on year. Our exports of the fruit to Japan, our biggest market, declined by 41 percent in January. Our exports to China, the second biggest market, went down some 32 percent. And to South Korea, banana exports decreased by 51 percent as well.
The Mindanao plantations are hardly hit by fusarium wilt, also called the “Panama disease,” and there has as yet been no cure to the disease afflicting our production, other than to transfer to “clean and clear” areas, which only the big multinationals can afford. Contract growers and independent producers are at their wit’s end.
What used to be Mindanao’s biggest agricultural export has now dropped to the sixth place among our top exports. In 2020, banana export receipts decreased 20.6 percent, and this year, the trend is toward a bigger decline.
Logistical problems also impact on our vaccine supply distribution. Unforeseen cold chain problems have supposedly caused deterioration of the precious life-saver.
Of course, the vaccines are coming to us in trickles, there being production problems among the pharmaceutical and biotechnology companies coping with simultaneous worldwide demand, along with the practice of vaccine nationalism by the rich countries.
But even with the trickles arriving, it seems that the complex logistical operations required to bring the vaccines to our different islands and regions has already posed problems. Vaccines have short shelf lives, and stories about 7,500 doses in Bicol being returned to Manila due to “spoilage” are worrisome.
We can only hope that our “czars” are able to untangle these logjams in time for the coming, hopefully at that, of the vaccines we bought come June and beyond.