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New Year Special Features '99

  • [Industry Forecast '99] Philippine Electronics Sector Expected to Register Export Growth
  • 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.
    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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    Updated: Mon Jan 4 15:10:26 1999 PDT