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| [Industry Forecast '99] Philippine Electronics Sector Expected to Register Export Growth
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January 5, 1999 (MANILA) -- The electronics sector of the Philippines
is set to post a substantial export growth rate in 1999 and continue
to serve as the engine of the country's overall export growth, according
to the Philippine Chamber of Commerce & Industry.
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The PCCI projects that electronics exports, which account for two-thirds
of total exports, will post growth rates of 21 percent in 1999 and close
to 30 percent in 2000.
Francis Ferrer, PCCI vice president for productivity and competitiveness,
said that the strong growth rates will be supported by an improvement
in major export markets and new or expanded production facilities coming
on stream.
One of the biggest foreign investments in this area -- an NEC Corp. plant
near Manila to produce hard-disk drives -- is scheduled to be operational
in May.
In the past four years, remarkable growth has been seen in foreign electronics
manufacturers locating facilities in the Philippines.
While the electronics sector is weathering the regional financial storm,
other local export sectors, such as garments, have been noticeably less
powerful.
In the first 10 months of 1998, the country's electronics exports totaled
US$16.5 billion, exceeding the industry's exports for all of 1997 (valued
at US$14.9 billion).
"At that rate, the sector likely generated more than US$19 billion in
exports in 1998," Ferrer said.
With the global electronics industry recovering, export sales should
reach US$23 billion in 1999, he said. Ferrer said that while at first
glance a weak peso was a boon to electronics exporters, the industry
must import more than two-thirds of its raw materials. He said that
a U.S. dollar at around PHP40 would be a "good level."
In 1998, the exchange rate averaged PHP41 to the dollar.
The PCCI is confident that the sharp contraction in total export growth
in the Philippines in October, to 9.3 percent (as compared to 19 percent
in the previous month), was an aberration.
The PCCI estimates that the average export growth in 1998 will be around
17 percent-18 percent, and that growth rates in November and December
will be in the double digits.
The Philippines has enjoyed annual export growth of more than 20 percent
in recent years, and has shown considerable resilience to the effects
of the regional economic crisis that has badly affected some of its
major export markets, notably Japan.
In 1999, the PCCI said that export growth won't slip below 10 percent
and may even average 15 percent.
"The electronics sector is keeping our exports at a high level," said
Richard Supangan, an analyst at the Center for Research and Communication,
a private think tank.
On the demand side, the main markets for electronics products (such as
microchips) are countries that are not directly affected by the regional
crisis, such as the United States, the United Kingdom and the Netherlands.
On the supply side, the makers of these products are typically the same
companies that buy them. Intel Corp., for example, brings products from
its wafer fabrication facility in Korea to its plant in an industrial
zone in Cavite, south of Manila. The products are then tested and packaged
for export to the United States.
"The Philippines doesn't have a big end-user market for electronics.
Multinational manufacturers have built a lot of capacity at their plants
here in the past two years, and the products they make are mostly shipped
to their parent companies for final assembly," said an analyst at an
Asian securities company.
Motorola Inc., Siemens AG, Fujitsu Ltd., Texas Instruments Inc. and Toshiba
Corp. are among the multinational companies with assembly facilities
in the Philippines.
"These companies will be in business for a long time, and even if one
product dies, they will make new ones and still have use for their plants
here," Supangan said.
Supangan noted that the Philippine government offers incentives to foreign
investors, including long tax holidays. Inexpensive labor is another
force that supports the country's electronics industry.
(Margarita Roa, Asia BizTech Correspondent)
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