May the best be here to come in 2016

May 2016 bring better health, joy and contentment and may peace reign on earth. 2015 was a year filled with terror, a terrible year for hapless refugees scrambling to find a place under the sun for their families. May we have more compassion, less greed and apathy for a better 2016.

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And of course, may 2016 bring better business for the country. Last week, we started this short series on the year that was, our yearender for Philippine business, and covered the assessments of the automotive industry by CAMPI (Chamber of Automotive Manufacturers in the Philippines Inc.) president Atty. Rommel Gutierrez, the information technology industry by IT-Business Process Association of the Philippines (IT-BPAP) president Mr. Jose Mari Mercado, and the insurance industry by PIRA (Philippine Insurance and Re-insurers Association of the Philippines) president Michael Rellosa who, I failed to mention in last week’s column, is also currently the chairman of the Asean Insurance Council whose membership covers ten countries.

As a brief rejoinder to the PIRA item, this industry is one of the most responsive to the times. One of the changes is the channel of distribution where one does not have to go through the traditional insurance agents – you can now purchase insurance on line. Also, where before one had to purchase insurance to cover longer periods, the industry has opened itself to very short terms like three or four days, so when you go on a trip to a specific destination, you and your family are covered for possible accidents. And lastly, with the persistent ATM fraud that involves hacking and skimming, there is also insurance coverage for this. As new risks present themselves, there are, thankfully, new products available to cover these risks.

Now let’s turn to the other industries we have thus far covered, and one of these is the electronics industry, one that once reigned supreme as the country’s best performer for years and now has sadly become the big laggard in the past few years. We found ourselves left behind by technology in this fast-paced global industry, relegating us to the back and leaving us with just our legacy products to market to the world.

The Semi-conductors & Electronics Industries in the Philippines (SEIPI) is very ably headed by Mr. Dan Lachica as president and he has managed to steer the industry to cope with strong geo-political factors that constantly affect it. The good news is, he doesn’t expect any contraction but assesses their 2015 performance as between a flat to a modest four percent growth, which is really a better picture than 2014.

This is one industry that understandably did not meet their road map. Their assumption of $2.5 billion/year of foreign direct investments (FDI) did not happen – they only got less than half of this, so they had to turn to organizations like the US AID and the Dept. of Trade & Industry (DTI) for much-needed funding.

Now, their new road map which they call the Product & Technology Wholistic Strategy is designed to bring the Philippine electronics industry higher up in the value chain in sectors that are growing. Mr. Lachica says they need to identify, based on emerging trends, what products and/or technologies they should be involved in in the next five years.

In terms of FDI, we are ahead of say, Myanmar, but terribly behind others. The SEIPI head says we are blessed to have between $1 and $2 billion in direct foreign investments, but compare this with Indonesia’s $20 billion and Singapore’s $70 billion. The biggest problem confronting us, he says, is the extremely high cost of power here, a sentiment that all Philippine-based industries share. Because of this, we have to content ourselves with perhaps never having what they call the Wafer Fabs, something that Indonesia and Singapore have, because of the high cost of power and the poor quality that we still have. We still have our test and assembly and packaging operations (these are the legacy products) which are still relatively strong. Now we need for the Philippines to go up the value chain with more complex packaging technology and design.

The growing sectors in this industry include the office products, medical instrumentation, and consumer electronics. The areas which are not growing or maybe are even contracting include automotive electronics, EDP electronics and data processing. As of October, our electronics export reached $23.8 billion, down from $26-28 billion from last year which is still good from the industry’s perspectives, according to Mr. Lachica.

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Going now into a more promising field, the Philippine Franchise Association (PFA) headed by president Alan Escalona reports a good 2015. This is one industry that consistently posts a growth of between 9-10 percent/year. Even as foreign food and beverage brands pour into the country, our local brands continue to expand and give competition to these global brands. Interestingly, there are more home-grown food specialties that have invaded Metro Manila, going out of their comfort zones in provincial cities to compete in the big metropolis. Traditional native delicacies are now being franchised with modest success, and this is good news for micro and small business entrepreneurs.

Aside from F&B, the fashion industry is also getting more and more competitive. We see the influx of more foreign brands especially in clothing, shoes, bags and accessories which only drives our local designers and manufacturers to achieve a higher sense of competitiveness. Ours is still a price-driven market, so this has been a big plus for our local fashion industry, and the big local brands have upped this by improving their quality of service in their various outlets and stores and even getting foreign endorsers in preparation for their entry into the global market.

The wellness sector which was a rising star two years ago has settled down to a flat growth this year, which is still not a bad performance. The Filipino market has become a more sophisticated one, according to Mr. Escalona, so we now see a more discriminating market that now recognizes the advantage of fresh, cold-pressed juices over the watered-down cheap packaged juices on the grocery shelves.

A very competitive sector is the convenience stores. Where before only about two or three brands dominated the scene, there are now 8-10 brands in the market, and the newcomers are mostly foreign brands that have partnered with local companies like Family Mart, for instance. Seven-Eleven, a foreign franchise, is still the biggest, but our home-grown Mini Stop is presenting good competition.

PFA remains dynamic, giving regular seminars on food safety, quality management, and ISO certification among others, to raise the level of competitiveness of its members. The association hopes that the government can be more supportive in terms of making procedures like licensing easier. 2016 looks good for them.

We’ll have more for you next week.

By the way, viewers of the TV show Business & Leisure who may have missed any of its past episodes may now view them at their convenience anytime of the day on its website www.businessandleisure.ph. This also goes for the readers of this column who may have missed some articles in the past as we have this column’s archieves also within the website.

The best of the New Year to everyone.

Mabuhay!!! Be proud to be a Filipino.

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