Tuesday, September 25, 2018
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No Free Lunch

Why can’t we export more?

Among the Asean-5, our export earnings have consistently been the lowest; worse, we’re slipping farther and farther behind. In 2005, we trailed Indonesia by $45 billion (we earned $41 billion against their $86 billion). Last year, the gap was already more than double that, at $100 billion ($69 billion vs. $169 billion). In 2007, our exports ($50.5 billion) still exceeded Vietnam’s ($48.6 billion). Last year, Vietnam made $214 billion, even more than Indonesia, which it had overtaken three years ago.

The latest export data show that we continued to slip even farther behind. In the first quarter, our exports dropped by 5.5 percent, when our neighbors continued to post impressive growth in theirs, from Indonesia’s 8.7 percent to Vietnam’s zooming 25.1 percent. Many have begun to notice this glaring anomaly, and ask: How can we be moving in the opposite direction from our neighbors, and the world? What are we doing so differently, and so wrongly, that our export performance, already bad as it has been, has even turned for the worse?

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Indeed, the main reason the peso has been losing value in recent months has been the fact that our foreign exchange inflows via exports are now far outstripped by outflows via imports. Inflows from foreign investments, overseas worker remittances and tourist spending could not make up for the shortfall. We need nothing less than a deliberate strategy and aggressive action plan to dramatically boost our exports in the years ahead.

We could take inspiration from our come-from-behind neighbor Vietnam, which has been posting double digit export growth in recent years, with the growth rate exceeding 20 percent in the last two years.

We could start by examining our recent export performance more closely. In the first half of this year, our total export earnings fell 3.8 percent from last year, even as electronic products, our top export category accounting for 56 percent of all exports, managed to grow by 5.3 percent. But most of our top 10 export products dropped at double-digit rates, including chemicals (-44.4 percent), coconut oil (-28.9 percent), ignition wiring sets (-27.5 percent), and bananas (-13.2 percent).

It’s well worth examining why. For coconuts and bananas, the problem has been traced to large-scale destruction from the “cocolisap” pest and Panama disease (Fusarium wilt), respectively, which agriculture authorities have failed to handle promptly and adequately. For nonfarm exports, we need to study more closely whether the problem has been on the demand or supply side.

In past articles, I’ve pointed to at least two things we may be doing differently from our neighbors that could explain our export gap with them. One, we have traditionally failed to provide enough support to our exportable high value farm products. For one thing, research and development support has been highly inadequate, even for our export mainstays of coconut, bananas and mangoes. For decades, we have lacked a coherent and well-funded national strategic plan for these crops.

In coconut, we have wrangled over the Marcos-era coconut levy for decades, with hardly any concrete movement forward. We have devoted inordinate attention and budget resources in quest of full rice self-sufficiency, even as our neighbors that have never aspired for it rank much higher than we do in food security (and pay much less for rice). I have also called attention to our glaring lack of gamma ray treatment facilities, which our neighbors have used to good advantage to export fresh agricultural produce far more than we can.

Another flaw that I’ve argued to be getting in the way of potentially far more exports by our small and medium enterprise sector is a prevalent “kanya-kanya” or individualistic approach to business. I’ve heard of many missed opportunities in exports when small entrepreneurs were unwilling to team up to meet volume orders from overseas. In the SME sector, more “coopetition” should be the way to go if they are to cash in on wide export opportunities, and government and private sector alike need to work toward this.

It’s time to get really serious about our exports. It’s been long overdue.

cielito.habito@gmail.com

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TAGS: Asean 5, economy, export earnings, Philippine exports
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