PH needs to solve supply constraints to hit exports target: DTI

FILE: Trade and Industry Secretary Ramon Lopez announces during a press briefing at the International Media Center (IMC) in New Delhi, India on January 25, 2018 that the Philippines and India has entered into nine agreements that aim to expand and strengthen the trade and investment relationship of both countries. YANCY LIM/PRESIDENTIAL PHOTO

MANILA — The Philippines has to address the supply constraints in raw materials that limit the output of exporters in order to achieve the 8 percent to 9 percent exports growth target for this year, the country’s top trade official said.

In an interview Friday, Department of Trade and Industry (DTI) Secretary Ramon Lopez said the limited supply of sugar, which drives the prices of the commodity to increase, is also becoming a challenge for exporters of processed food.

Lopez said the Export Development Council (EDC) has discussed the issue of supply and high prices of sugar in the local market.

Prices of sugar per bag is now more than PHP2,300, higher than the “sweet spot” or the price range that is favorable for processors, which is from PHP1,700 to PHP1,900 per bag, he said.

“Hopefully, we can bring in sugar at that cost. That is one of the causes why [merchandise] exports figures are down,” he said adding that some manufacturers would rather not produce if the sugar supply is limited and prices are high.

“Therefore, we have to work closely with the agriculture sector because it’s a supply chain issue. We need to make sure that the connection is not broken. We need more of these raw materials, please produce at the competitive price of this material. Or if not, allow us to import,” Lopez added.

He clarified that instead of importing the raw materials, he has bias for local sourcing of these products.

“You want the local content. You want the local producers to benefit from this growth in exports. It is also a greater added value for the country,” he said.

If this supply constraint will not be immediately solved and prices of sugar would continue to rise, he said it is possible that even local food manufacturers and exporters will move their operations in countries where production cost is more competitive.

From these countries, they can import their products back to the Philippines and other export markets, he added.

“That’s the risk we are facing. The more it will challenge our export manufacturing base. That’s why we have to make sure that our exporters will have an easy time getting their supplies,” Lopez said.

Data from the Philippine Statistics Authority (PSA) showed that merchandise exports in January to July this year declined by 2.8 percent to USD38.74 billion from an exports growth of 24 percent in the same period last year amounting to USD39.87 billion.

But overall export revenues, which include services exports, increased by 4.1 percent in the first half of the year, according to Lopez.

He is confident that the country would achieve its 8 percent to 9 percent export growth target for this year, with the improvement in figures in Janaury to June period.