Philippines: in a ready stance for growth Since the 2008 global financial crisis, the plastics industry in Asia has made tremendous leaps forward. Setting the field for more wins, countries like China, India, Thailand and Indonesia are scoring goals in this area. At the same time, Philippines, while keeping a low-profile is also optimistic of scoring high, says Angelica Buan in this report based on the recent Philippine Die & Mould, Machineries and Equipment Exhibition (PDMEX). the expansion of industry sectors and the response has been positive – over the five times that the event has been staged. This is also evidenced by the increase in the turnout of participants as well as visitors. There were about 273 exhibitors this year, compared to 260 in 2009, with 84 being local exhibitors. The rest came from Thailand, Singapore, Japan, Taiwan, Malaysia, Hong Kong, Korea, Israel, the US, Germany, Spain, Switzerland, Italy, Australia and France. The number of visitors in 2009 was pegged at more than 5,000 compared to the higher number of 7,000 this year.
Taking big steps A relatively young industry to start with in the Philippines, machinery and technology for plastics processing, such as injection, extrusion and blow moulding, started to arrive only in the mid-1960s, when these had already been utilised in the US, some as early as the 1950s. And in the 1970s, plastic pipe production began, thus propelling the plastics industry from thereon. With still multi-factorial aspects, such as trade policies and tariffs, local ordinances and inadequate logistics, preventing the industry from making a competitive break into the global market, local and foreign trade exhibitions serve as viable avenues for industry players to interact. The recent Philippine Die & Mould, Machineries and Equipment Exhibition (PDMEX), held 17-20 August in Manila, is a bi-annual machinery and equipment event that pools together different sectorrelevant industries, such as metalworking, rubber, plastics, semi-conductors, engineering and metrology. It is organised by the Philippine Die and Mould Association (PDMA), which is Luis Antonio Fuster, Chairman chaired by Luis Antonio Fuster. of the Philippine Die and According to Fuster, PDMA is Mould Association, says exhibitions like PDMEX is one progressively making efforts to of the ways the association help out its member-companies hopes will improve members’ – by providing cost-effective outlook of the industry activities, from training that is needed to obtain ISO certification to organising exhibitions like the PDMEX. Being a Federation of Asian Die and Mould Associations (FADMA)-affiliated organisation enables it to match local industries with foreign counterparts. “PDMA has been at the forefront of connecting with Asian associations; to involve PDMA members to have relationships with Asian members and organising trade exhibitions to let other countries participate in the Philippines,” said Philip Ang, Auditor of PDMA and also Vice-President of Samsotite Plastics, which is engaged in customised moulding for local companies and third-tier companies that export. Angelica Barrios who heads the events managing group, MAI Events, says that the exhibition aims to help with
Higher tariffs put a damper to business But there is a downside to the Philippines plastics market. For countries like China, which in 2010 topped the global market in its sales of injection moulding machines (RMB20 billion) and South Korea, which in the same year saw its die and mould industry grow at 6.1%, the plastics world is their oyster. The Philippines, while running on-track, is not immune to regional trade policies that affect tariff rates, policies at the national level and energy costs, thus slowing down its pace of growth. Belonging to the ASEAN Free Trade Area (AFTA), the Philippines has regulated its tariff rates. Currently, most of the imported raw materials have to be sourced from either non-AFTA member countries that impose relatively higher duties; or from AFTA countries that have higher tariff rates than the Philippines. This sentiment is echoed by Ang, “The tariffs of raw materials are high. And compared to zero duty for finished goods from AFTA countries, it makes it difficult for the Philippines’ moulding sector to compete. It would be cheaper to import finished goods rather than produce them in the country.” Question of readiness but exports an attraction The upside is that the country has become viable for exports – trading countries are beginning to look at establishing markets or for trading and outsourcing partners. LNE Precision Plastic Machinery, a micromould design and fabrication services company established in 2006 by Singapore-based precision-moulding company LNE Holdings, was a first-time exhibitor at the PDMEX. It sought out the opportunity to introduce an Italian machine, BabyPlast, being an exclusive agent for it in Southeast Asia. Lily Lee, Project Development Manager, also said she was able to identify local companies with precision moulding capabilities that were at 5
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CountryF ocus par with Singapore standards. Lee said the company is looking at supplying a few thousands of its micromoulded parts, for a start. Another company that showed interest in setting up a market base was Krungthai Plaspack (KTP), a 100% Thai-owned company. Also a first-time exhibitor, KTP leveraged on the networking opportunities during the event and it secured three serious enquiries, according to a spokesperson. The company produces customised products for food, healthcare and chemical packaging as well as housewares and bicycle parts, using Japanese injection/blow moulding and thermorforming machines. Meanwhile, the country is still championing the semi-conductor and automotive sectors. In his keynote address, during the opening of PDMEX, Robert Dizon of the Department of Science and Technology (DOST) said that the electronics sector accounted for about 60% of the country’s exports in January this year. However, these electronic components are not fabricated locally, resulting in higher operation and production costs. But Dizon said that several major producers had started localising their production, “to trim the need to import finished moulds from their parent companies.” Adding to this, Ang relates that the machines used in the country are all imported: “Sad to say, the Philippines does not produce any injection moulding machines.” His company, Samsotite, for one, uses Japanese-made machines. Cost of energy dragging down country Inadequate facilities and the high cost of energy in the country are also hampering growth. Says Ang, “Facilities is what we lack here in the Philippines, especially in the power sector. We are one of the countries in Asia with the most expensive electricity (cost).” According to a study by the International Energy Consultants, the average retail rate of electricity in the Philippines is US$18.1 cents per kw/hour, edging out Japan’s US$17.9 cents per kw/hour. Elsewhere in Asia, with the exception of Singapore and Japan, the average cost per kw/hour is US$0.11 cents. Hence, power costs deny local producers the edge to compete. Ang says, “If the government cannot address the power problems then local producers will have to look for other markets or venture into other businesses that use less electricity.” Still, silver lining is competitive edge Nonetheless, Ang opines that Philippines has an edge over countries like India in terms of infrastructure, especially its roads and water facilities. Likewise, the skills of the local workforce are globally competent, enabling the country to be a viable destination for foreign investors looking at expanding their portfolios and facilities-base. He adds, “Due to the vast number of engineers, big players are keen to expand in the country. Furthermore, our workforce is very easy to train in special skills. And also Filipinos are adept in speaking and writing English.” Undergoing setbacks and overcoming these are normal in the volatile moulding industry. What were said to be unfettered manufacturing hubs like China and India, whose inexpensive labour costs were among their main selling points, are now beset by wage hikes, not to mention higher inflation. Thailand is also addressing a 45% wage increase issue. Needless to say, nothing is permanent. While it is obvious that support from relevant government agencies can have a positive impact on the industry, individual efforts can also make a big difference. Like Samsotite resorting to a simple solution. Ang says, “We are moving to the south side of Manila because most of our clients are there. This will minimise the cost of transportation and travel time and amount to savings because we were previously in the north.” Industry-wise, Dizon offers a solution. “The industry should build up capacity. This can strengthen the industry’s market position,” he suggested at PDMEX. ◆ 6 I n j e c t i o n M o u l d i n g A s ia • S E P T E M B E R 2 0 1 1
IMA September 2011 Country Focus