Cebu exporters bullish, buoyed by forex gains

Business Mirror 23 November 2008

CEBU CITY—Despite doomsday forecasts on the economy, exporters in Cebu said they are looking forward to more opportunities in 2009, with stronger players still in the thick of the fight backed by aggressive marketing, efficient production and a more favorable exchange rate.

Philippine Exporters’ Confederation-Cebu president Jay Yuvallos admitted that several companies have closed down this year, but he underscored how the bigger and more established players have strengthened their positions.

“This [slowdown] does not mean the export business is no longer viable; there may be a slowdown in some businesses, but this situation has left industries with more stronger players which can compete globally,” Yuvallos said. “The slowdown has made the remaining companies more confident as they have managed to survive despite all these difficulties.”

Cebu’s export industry, while dominated by multinationals in IT and electronics, are driven by creative industries—export furniture, fashion accessories, as well as gifts, toys and houseware—and indications are that while 2009 will be another challenging year, the Cebu-based exporters are in a better position, especially compared with the regional competition.

According to Philippine Export Development Council member Apolinar Suarez, the “friendlier” exchange rate has greatly helped exporters regain revenues lost when the peso hit the P42 level last year.

He said that successive quality-control setbacks in China’s industries have made buyers look for other better sources like the Philippines.

Vietnam is also starting to have labor problems along with supply-chain difficulties with long monsoons in 2008; while Western manufacturers in Indonesia have started to move out because of security problems.

“We have seen designers who we used to ‘export’ to China coming back. Our buyers who went to China for cheaper products are now coming back,” Suarez said.

Jennifer Cruz, former president of the Cebu Gifts, Toys and Housewares (GTH) Foundation, said Cebu-based exporters “already pushed to the wall” are forced to innovate and create more efficient production lines.

“Now that we are more efficient, our prices can compete with China and Vietnam,” Cruz said.

While overhead-cost cuts are common in most factories, so is sharing of inventories between companies and diversification of products to meet industry demands, says incumbent GTH president Pete Sepulveda.

“Instead of making furniture, Cebu exporters can switch and make lamps instead. That is one of [their] strengths,” he said. “Cebuano exporters are already pushed to the wall, yet we are still here.”

Cruz said not all distributors and retailers in the United States are seeing a bleak 2009. “We actually see that they are preparing for an upward turn,” he said.

Just last week Cruz and his company, 33 Point 3 Exports Inc., received a group of US-based buyers looking for products to buy and distribute to their 1,700 stores.

Cruz has orders from the same company that will last until the middle of 2009.

Eric Casas, the president of the furniture exporters group Cebu Furniture Industries Foundation said his own company and several others are even set to surpass their 2007 sales revenues, aided mainly by the better exchange rate.

“There are still a lot of opportunities in the industry if the companies would only focus on our strength in design and innovation,” Casas said.

Other markets outside the United States also offer exporters another opportunity.

Majority of members of the export fashion accessories group are still experiencing growth because a large chunk of their production goes to Europe.

Janet Chua, president of the Fashion Accessories Manufacturers and Exporters Foundation, said the industry is somehow resilient despite the slowdown because of the fast pace in fashion trends.

“Chinese manufacturers are so quick to flood the markets with their products that they are no longer viable,” Chua said. “Buyers are now moving toward green fashion and Cebu was able to position itself in that market.”

She added, “We are still hoping for growth although at a slower pace.”

Casas said emerging markets like Russia, South Africa and the Middle East and even the domestic market have given furniture exporters some optimism.

“New players have emerged in the United States as the bigger players are having problems,” he said.

Yuvallos said the tougher times have forced companies to innovate and be creative, putting them in a better position to compete when the good times come.

“We believe the resiliency of the industry and its payers should be highlighted,” he said. “When we only talk about the bad things, we will all [give] in to fear, and that has a more crippling effect.”

In a nutshell, Suarez said the export-furniture industry is still viable and, in fact, growing. “While many companies have closed down, new players have come in. That means there is still business in export,” he said.