Export Hot Spots: Post-Crisis Offensive Strategies

1. Export Hot Spots: Post-Crisis Offensive Strategies Dr. Thomas G. Aquino Senior Undersecretary for International Trade Department of Trade and Industry 2nd Quarter Gen. Membership Meeting Philippine Exporters Confederation, Inc, Makati City July 2, 2009

2. Outline • Assessing Past Trends • Reviewing Projections • Viewing Post-recovery Scenarios • Post-crisis global environment • Post-recovery sectors • Government policies and Business strategies

3. In periods of uncertainty, it is important to ask: What can be known? • The decade is marked by three crises (3Fs) most relevant to the Philippines: • Food, Fuel, and Funds

4. World Fuel Prices (index, annual, 1995=100)‏

5. World Rice Prices(monthly, in US$ per metric ton)‏

6. Not known When? Will it regain its previous dynamism? Financial Crisis Summary: Peak-to-trough changes, all countries Averages Cumulative % change Duration, in years Real housing prices -36 5.0 Real equity prices -56 3.4 Unemployment, trough-to-peak 7 4.8 Real per capita GDP -9.3 1.9 Source: Reinhart and Rogoff (2009), as cited by Prof. Pedro Videla (UA&P forum, April 2009)‏ Levels of Uncertainty • Known • The global economy will recover.

7. The long-term view: focus on 2000-’09

8. What is known: • A recovery follows a recession. • When? Green shoots are starting to show; perhaps road to recovery visible by end of 2009. • Will it regain its previous dynamism? Yes; but there will be a reconfiguration among global economic players.

9. Projected Type of Recovery Markets U-Curve • Emerging markets: • BRICA + Next 11 * • European Union L-Curve • Japan W-Curve • United States Different Recovery Paths * BRICA – Brazil, Russia, India, China & ASEAN; Next 11 –Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, Vietnam. Source: Prof. Bernardo Villegas, UA&P Mid-Year Briefing, June 2009

10. Real GDP Growth(in %, Advanced vs. Developing Economies)‏

11. “Remerging” Economies (1820 to 2025, estimated % share of world GDP)‏ Big 4 European US Japan India China Source: World Bank, as cited by Prof. Pedro Videla (UA&P forum, April 2009)‏

12. Largest Economies in 2050(Projected GDP, in US$ Trillion)‏

13. Post-recovery assessment • The world will be as dynamic, if not more, than it was before the crisis. • Global income will be dispersed among more countries. • G-7 countries will be less relevant; focus will be more about BRICA and the Next 11 set of countries. • As the world recovers, it will be subjected in the future to the same pressures as it faced before the crisis (3F’s): Food, Fuel, and Funds

14. World Trade Volume(goods & services, annual % change)‏

15. Encouraging early-signs Year-on-Year declines were lower in Mar-Apr 2009 than in Dec 2008, Jan-Feb 2009; Month-on-Month declines are flatter.

16. RP domestic economy resiliency

17. Major Product Share January – March 2009 Electronics still the bulk of RP Exports TAFT: Textile, Apparel, Footwear & Travelgoods (incl. fashion accessories)‏

18. Electronics vs Non-electronics Exports January 2008 – March 2009 Non-electronicssaved merchandise exports from freefall Value in US$ Billion

19. 2008 2009 2010 growth actual value growth** value growth** value % (in US$ Million)‏ % (in US$ Million)‏ % (in US$ Million)‏ PEDP Revenue Streams 1. Electronics -8 28,501 -20 22,801 10 25,081 2. Motor Vehicle Parts/Components 9 3,002 -50 1,501 40 2,100 3. Food Processed Food 25 998 10 1,098 10 1,208 Fresh Fruits -3 723 8 781 8 843 Marine Products 38 808 20 970 40 1,357 4. Homestyle Products Home furnishings 13 1,140 0 1,140 10 1,254 Giftwares/ decors -10 183 -5 174 3 179 5. Minerals -5 2,482 -51 1,225 40 1,715 6. Natural & Organic Products 8 67 0 67 5 70 7. Textile, Apparel, Footwear & Travelgoods -14 2,297 -19 1,861 3 1,916 Other Products Construction Materials 9 183 -10 165 5 173 Petroleum 12 1,240 20 1,488 40 2,083 Metal components 19 578 10 636 20 763 Coconut Products 42 1,348 28 1,725 50 2,588 Others 4 5,474 4 5,693 7 6,091 Total Goods -3 49,024 -16 41,323 15 47,423 Total Services 20 10,140 27 12,890 30 16,756 BPO 20 5,850 25 7,313 30 9,506 other services 20 4,290 30 5,577 30 7,250 Total Exports 1 59,164 -8 54,213 18 64,179 Revised Export Targets 2009-2010

20. Post-crisis global environment • Return to dynamic growth but reconfiguration among players • US and Europe struggle to recover conditioned by structural differences, e.g. mobility of factors of production • Challenge to China in wielding/asserting global influence (FDIs, ODAs, Africa engagement, participation in multilateral non-economic initiatives e.g. security, health, disaster assistance, etc.) as a huge country-market • Efforts by ASEAN and rest of dialogue partners i.e. Japan, Korea, Australia/New Zealand, at regional integration continue • Moves of India to progressively implement reforms towards an open-market economy • Rise of South America as highly-competitive developing regional market e.g. Brazil • Africa in the horizon with opportunities for raw material sourcing, transfer of know-how/services, and cost of labor advantage.

21. Post-recovery sectors • Pre-global recession merchandise and services exports are currently undergoing stress test. Sectors likely to recover or emerge may fall under several categories: • Exportable goods and services, backed by strong domestic market base, would have higher chances of success in foreign markets • consumer products, e.g. processed food • services for overseas Filipinos • Goods and services able to keep in step with increasing product standards in overseas markets • organic and natural products • Providers of services based on relatively lower-cost business models • IT technical support • healthcare • Goods and services based on unique, natural selling propositions of a tropical, archipelagic country • specialized tourist facilities • events creation

22. Government Policies and Business Strategies • Government trade staff to receive training to intensify familiarity with changing realities of competition and entry into foreign markets • US market undergoing structural change • Africa as an unexplored region • Elevate status of institutions, build capacity, and increase size of resources devoted to export trade financing, including proper appreciation of opportunities and risks in reconfigured foreign markets • PhilExim • Step-up efforts that will enable national and local agencies to realize the need and implement measures that will remove unnecessary costs that underlie trade transactions.

23. Government Policies and Business Strategies • As subsidiary bodies, export-oriented industry associations to continue professionalization of their services to enable the national export-oriented federation to address national issues affecting exports across sectors and regions. • Exporting companies to deepen expertise in doing business in specific foreign markets as a way of internationalizing their core operations. • Exporting companies to continue encouraging stakeholders (private and public) behind industry value chain to implement best practices that make country exports highly competitive.

24. Export Hot Spots: Post-Crisis Offensive Strategies Dr. Thomas G. Aquino Senior Undersecretary for International Trade Department of Trade and Industry 2nd Quarter Gen. Membership Meeting Philippine Exporters Confederation, Inc, Makati City July 2, 2009