Page 1

A STUDY OF THE EXPORT FINANCING SYSTEM N THE PHILIPPINES

Mario B. Lamberte, Rosario G. Manasan Erlinda M. Medalla, Josef T. Yap and Teodoro S. Untalan WORKING PAPER SERIES NO. 89-12

June 1989

Philippine Institute for Development Studies


TABLEOFCONTENTS

I.

Introduction A. B. C. D.

II.

V.

7

20

Analysis of Fiscal Incentives to Exports Access to Intermediate Inputs at World Market Prices ................................ Export

Incentives

The 1.0 2.0 3.0

B.

The

Export

under

Export Structure and Pre- and Post-Shipment

The Philippine Forecasts of Post-Shipment

A.

B.

.............................

2.0 2.1

Institutional

A.

Policies

7 16 18

Philippine Demand for A. B.

iV.

Promotion

1 3 6 6

Trade Policy Environment .......................... Fiscal Incentives for Exports ..................... i.0 Theoretical Framework ................... _ .....

2.2 III.

1

Rationale and Ob3ectives of the Study ............. Sources of Data .... , .............................. Existing Literature on Export Finance ............. Organization of the Study .........................

Export A. B.

..........................................

BOI

and

EPZA

Forecast of Financing

.....

......... Exports and ...........

Export Structure ................... Exports and Demand for Pre- and Financing ...........................

Support

for

the

Export

Sector

...........

Government's Export Development Program ....... The Present Export Development Program ....... Service Coverage ............................. Effectiveness of Export Development Program ...................................... Private Sector and Exports .................... Financing

System

in

the

Philippines

............

21 34

47 47 89 95 102 103 117 118 122 131

The Export Financing System in the Philippines .... 1.0 Export Refinancing Scheme of the Central Bane 2.0 The Commercial Banking System ................ 3.0 Special Credit Programs ...................... 4.0 Export Credit Guarantee System ............... Experlence with Export Financing .................. 1.0 Banks ........................................

131 131 140 143 163 186 i_6

2.0

197

Exporters

............

. .......................


VI.

Overall Evaluation of the Export Financing System the Philippines ....................................... A. B.

VII.

Theoretical Export Financing System ............... Evaluation of the Export Financing System ......... i._ Refinancing Scheme of the Central Bank ....... 2._ Financing Scheme .............................

Conclusions and Agenda for Policy and Institutional Reforms ................................................ A. B. C.

References Annexes

in

Reforms for Achieving a Free Trade Status on the Export Sector ..................................... Reforms for Assuring Automatic Access to Export Financing ........................... .............. Scope for ADB Assistance .......................... ........................

_. ........................

.....................................................

217 217 220 220 222

230

232 233 239 243 245


LIST OF TABLES,

FIGURES

AND ANNEXES

I.l II.l II.2

Profile of Sample Respondents ... ............. . ..... Real Effective Exchange Rate ........................ Average EPRs .......................................

II.3

Number of Items Regulated, Liberalized and Newly Regulated by ..' Year ,. 1977-88 --ooeo.o.eoooooooe,a._... Report on Nominal Protection for the Philippines Customs Tariff ooee_eooeoa_o.oeaoaoooe, eeoeeoooe._.o. Nominal Exchange Rate and Real Exchange Rate Index(: Philippines vs. Korea, Singapore, Thailand, Taiwan, and Hongkong 1973 i. 1989 _---o*ooeo.i_eo.eoooaae_.eo. Documentary and Other Requirements for Establishment of BMWs -oa*-oeQeoooeo-aeoeeooono_eo.o_.oo.oe..ooo=. Documentary Requirements in Application for Duty Exemption Under CAO 3 -- 78 ---oo-_*eooeoeeo..o.oo_eooe Procedures for the Release of Importation Under CAO 3-78 ............................................ Requirements for BOC Drawback Claims ............... Requirements and Procedures For Fixed Drawback Scheme .............................................. Comparison of Incentives Under B P391 and E0226 ..... Change in the Internal Rate of Return Of Hypothetical BOI Registered Firms Under BP391 ...... Change in the Internal Rate of Return of Hypothetical BOI Registered Firms Under EO 226 ..... Project Cost of BOI Approved Projects, 1981-87 ..... Internal Rate of Return of A Hypothetical Firm Under Selected Incentive Schemes In ASEAN Countries, 1988.. Special Incentives Given by the Government ......... Summary of Selected Trade and Fiscal Problems, Recommendations and Prospects .. .................... Importance of Natural Resource-Based Exports in Philippine Trade ...................................

!I.4 II.5

II.6 II.7 II.8 II.9 II.10 II.ll II.12 II.13 II.14 II.15 II.16 II.17 III.l III.2 III.3a III.3b III.4a III.4b III.4c III.5 III.6a III.6b III.6c III.7a III.7b

Philippine World Exports By 1-Digit PSCC Category .. Distribution of Philippine Merchandise Exports ..... Percentage Distribution of Philippine Merchandise Exports ............................................. Value of Exports by Major Commodity Group, 1970-1987 Growth Rate of Philippine Exports, 197_-1987 ....... Structure of Philippine Exports ................... . Percentage Distribution of Total Exports, Traditional/Non-traditional 61971-1987) ............ Merchandise Trade (F.O.B. Value) ................... Annual Growth Rate of World Trade - D MCs, EEC, US, Japan and ASEAN • _ • • "''e_-eeoo--oee..egloooeeeo....o..... • Percentage Share of Imports/Exports to Total Tra_e, by Country of Destinatlon - 1965-1988 .............. Average Percentage Distribution of Export Products to Total Exports: ASEAN, DMCs and WOrld ............ Average Growth Rate of Philippine Exports to DMCs and World Exports -.--.-eoaQee..eo.oe,e.o..eeeo.eoea

5 12 12 14 15

17 23 26 28 3_ 31 36 38 39 42 43 46 48 62 64 65 66 68 72 76 78 79 80 81 83 85


III.7c III.8a III.Sb III.9 III.10 III.lla III.llb III.llc III.lld III.12a III.12D III.12c III.12d IV.I IV.2 IV.3 IV 4 IV.5 V.I V.2

V.3 V.4 V.5 V.6 V.7 V._ V.9 V.10 V.II V.12 V.13 V.14 V.15 V.16 V.17

Traditional and Non-traditional Exports to DMCs and World Exports .................................. Percentage DistriDution of Philippine Merchandise Exports by Destination (1987-2000) ................. Distribution of Philippine Merchandise Exports by e_u_eaoo_taoooeQooeooo_eo_o Destination (•1987 i 2000) Total Merchandise Exports, 1977-2000 ........... ,... Comparlson of Central Bank and PIDS Forecasts, 1989-1994 .......................................... Pre-snipment Financing Requirements By 1-Digit PSCC Category (1989-2000) ............................... Post-shipment Financing Requirements by 1-Digit PSCC Category (1989-2000) ............................... Percentage Distribution of Philippine Merchandise Exports By 1-Digit PSCC Category (1987-2000) ....... Distribution of Philippine Merchandise Exports by 1-Digit PSCC Category (1987-2000) .................. Percentage Distribution of Philippine Merchandise Exports Classified as Traditional/Non-traditional .. DistriDution of Philippine Merchandise Exports as Traditional/Non-traditional ........................ Pre-shipment Financing Requirements Classified as Traditional/Non-traditional ........................ Post-shipment Financing Requirements Classified as Traditional/Non-traditional ........................ One-Stop Export Documentation Center: Participating Agencies ........................................... Government Funding and Support, 1989 (DTI Agencies)..ll6 Services of Government Agencies Availed of _oooomeooeo*oo_ooooooooomoo*ooaeooQ_g*o by Exporters iooeeooooeo_oetoQol •Trade Associations of Exporters • The PCHI-TLRC Financing Programs ................... Central Bank Rediscounting Policy, Inflation Rate toeo_o_ooeem_eee_e_aoo and Various Interest Rates • Outstanding Rediscounts of the Central Bank, Loans Outstanding of Commercial BanKs, and Commodity Exports ............................................ Loans Granted by the Central Bank to Commercial Banks ................................................ Total Resources of the Philippine Financial System •Loans Outstanding: Commercial Banks ................ Some Features of the Special Lending Progralns ...... ALF And IGLF Availments by Investment Area ......... IGLF Sources of Funds .............................. Interest Rates on •IGLF Availments of Participating Financial Institutions ............................. Operating HighligHts, GFSME ........................ GFSMZ Loan Availments by Investment Area ........... Past Due Accounts, GFSME ........................... Income Statement, GFSME ............................ Annual Performance Highlights, ECGP-SMI ............ Actual NumDer of Participating Banks ............. .. Annual Guarantee Issuances, by Type ................ Annual Guarantee Issuances, by Product .............

87 90 90 92 94 96 97 98 99 100 100 101 101 113

121 125 129 134

138 139 141 142 145 148 150 152 168 169 170 171 178 180 181 182


V.18 V.19 V.20 V.21 V.22 V.23 V.24 V.25 V.26 V.27 V.28 V.29

V.38 V.39 V.40

VI.2

VII.I Figure Annex

Amount of Export Loans Granted in 1988 ............. Export Loans ....................................... Types of Collateral for Loans ...................... Difficulties in Extending Financing to Local Exporters .......... ................................ Banks' Availment of Guarantee Facilities ...........

191 191 192

Ratio of Credit Terms to Total Exports ............. Sources of Financing Export Production, 1988 ....... Percentage of Exports in 1988 Which Were Prefinanced and Received Post-s_ipment Financing ...... Export Financing from Local Banks .............. .... Cancellation of Orders by Buyers ................... Export Prospects for the Next Three Years and Prospective Markets ......... .......................

V.41 V.42 V.43

VI.I

183 185 188

Ratio of Guaranteed Loans to Export Loans Granted in 1988 ............................................ Claims Made Under the Guarantee Programs ........... Problems With Export Guarantee Facilities .......... Ma3or Product Lines ................................ Form of Products/Services Exported/Sold in 1988 .... Countries Where Firm Exported to in 1988 ........... Annual Sales and Export Sales ...................... Average Size of Transactions in 1988 ............... Percentage Change of Export Sales in the Last Three Years ...... . .................................

V.30 V.31 V.32 V.33 V.34 V.35 V.36 V.37

V.44 V.45

Guarantee Defaults Trend ..... , ..................... Profit and Loss Statement, ECGP-SME ................ Number Of Export Customers, 1988 ................... Size of Individual Transactions, 1988: Banks' Responses ............................... ........... Terms of Export Transactions ....................... Letters of Credit ..................................

188 189 189

192 195 195 196 196 198 199 200 201 203 204 2_5 2_6 208 210 212 213

New Export Products ................................. Summary of Selected Finance-Related Problems, Recommendations and Prospects .... .................. Commercial Banks' Approval Rates for Every i_0 Loan Applications Received in 1986 ...................... Ratio of Agricultural Loans to Total Loans and Ratio of Agricultural Loans Guaranteed to Total Agricultural Loans Granted, Commercial Banks, 1981-1986 .......................................... Pro]ected BanKs' Loans and Discount, and Pre- and Post-Export Financing ............. . ................ I Total Exports, FOB Smillion ........................ II ....................................................

214

A B C D E

245 247 248 249

F G

List of PersonsInstitutions Visited ............... Organizational Chart (DTI) ......................... 1987 Positional Organization Chart (GFSME) ......... Philguarantee Organizational Chart ................. _hilippine Export and Foreign Loan Guarantee Corporation ................. . ...................... Export Credit Guarantee Program for Small and Medium Industries .................................. Proposed Guarantee Assistance Program for Overseas Contractors ...............................

215 223

227 240 61 219

250 253 255


A STUDY OF THE EXPORT

FINANCING

SYST_4

IN THE PHILIPPINES*

Mario

I.

B. Lamberte, Rosario G. Manasan, Erlinda Josef T. Yap, Teodoro S. Untalan**

M. Medalla

INTRODUCTION

A.

The

Rationale

and Objectives

Philippines

went through

Inappropriate

economic

nighest

and unfavorable

crisis. faster

level,

hefty

a recession political

external

reforms.

industry

sector

In

for two

consecutive

instability,

at

the

enyirormlent all contributed

to

the

has rebounded

which immediately

the pack.

Merchandise

at a relatively

instituted

1988, GNP grew by 6.7 percent

leading

years.

corruption

the economy

under a new government

and economic the

policies,

In the last three years, pace

of tne Study

political

in real terms

exports

increased

with by

a

27 percent.

*This study is inade possible Asian Develo_ment Ban_ (ADB).

through

_le financial

support

of

t21e

**The authors are Vice-President, Research Fellows (Manasan, Medalla and Yap) and •Research Associate, respectively, of the Philippine Institute for Development Studies (PIDS). The views express_ necessarily

reflect

in this study

are those of the authors

those of the Institute.

and do

not


2

Despite

the

instituted

remarkable

by the gover_aent,

to the attainment solution getting more

seam,s

problem,

perhaps

proposal

along

The

huge

potentials

t_he Philippines

In

administration been

that has been time,

the

Balassa economic

overwhelming 1986).

In

debt

no

that

is

piles

up

into

serious

The debt

reduction

The reluctance

of Bhagwati

countries

and exports. has

on

the

is

the

tnis context,

the

(1978),

data

exports

and

where

and

this interest

has

dragons;

Michaeley

in the

is perceived

by many

(Power and Sicat

as

fifties over

exhibiting

i_oerative

of

exports.

1971; Tan 1979;

becomes

(1977),

balance

nurture

pursued

same

link between

recurring to

success

At the

that has been carried

promotion

past,

design

the positive

need

strategy

trade regime

export

in the

worldwide,

In the Philippines,

and early eighties bias against

concern

export performance.

country

its

its growth momentum.

(1978), Krueger

the import suDstituting

examine

this is one area

of the Fast Asian

to their

highlighted

and

in the recent

Perhaps,

policies,

with cross

inward

well

to sustain

stories

largely attributed

and the concomitant

seventies

look

there has been a renewed

(1978) doc_nted

Furthermore,

external

of more developed

untapped.

develop

by the success

problems

in which

burden

put the economy

remarkably

of export promotion

growth

constraints

debt

is a long shot.

therefore

have performed

years,

works

payments

sixties

should

still r_mained

stimulated

to service

already

to such solution.

can further

recent

serious

the 1984 - 1985 crisis.

banks and governments

Exports

faces

reforms

One such constraint

shock could easily

the Brady proposal

block

and ma3or

is the external

Borrowing

far worse than

Philippines

strengths.

the

each year.

of creditor

key stumbling

growth.

to be near in sight

heavier

recovery

still the economy

of a sustainable

debt, and an external

part

economic

and into an

Medalla not

only


3 because

exports

are by themselves

desirable

they

bring and the favorable •growth

also

because

promotion

of

the need

would

imply

implicit penalties as

programs

study

to counteract

with

review

2.

analyze

the Philippine

3.

provide

forecasts

B.

export

agencies

providing

and evaluate

key

agencies

environment

as well

•activity over and

above

promotion

policies

financing

and

system.

of the Philippines;

and demand

for post-

and pre-shipment

of

non-financial

assistance export

government

to exporters; financing

system

in

the

and policy

strengthen

the export

and

institutional

reforms

that

can

further

sector.

of Data

from three groups

officers

for •the

structure;

the existing

The study uses both primary obtained

Export

compensate

focus on export

the •contribution

recommend

Sources

•bias.

but

from 1989 to 20_0;

Philippines; 6.

export

policies

of exports

and assess

describe

that

exports

to:•

the export promotion

and private 5.

special

it attempts

i.

descriDe

anti-export

exchange

strategy.

•examines the

of the Philippines

More specifically,•

4.

of increased

to the exporting

in a neutral

therefore

financing

the

of the foreign

exports •in the macroeconc_ic

incentives

that which would prevail

This

implications

the use of instruments

against

those that provide

because

of

providing

and secondary

of data

export-oriented financial

sources. private

data.

The primary

The first group institutions

and non-financial

services

data were

consists

and to

of

goverr_nent exporters.


4 Interviews The

were

conducted

information

unpublished

gathered

reports

The second

group consists

medium'size

banks

as

total

assets

used

bank; and one small

in choosing

The

third

traditional

these

six

sample

exporters.

For

sent

Metro

Metro Manila

the National i Industry

provided

was used

Lconomic helped

hand-outs agencies.

generally

with

system.

gover_nent-

large domestic

The aggregate

assets

48

banks;

of

percent

Non-random

A structured

of 23 Five

these of

the

sanloling

was

questionnaire

firms are

which

purely

summariz_ in

based

in

in

are

was utilized

gathering

regarding

personal

in Choosing

identifying

I.l.

the

respondents. Au_]ority

indirect

A

the

sample

questionnaires answers

given

while

were in

for

were conducted.

The regional

using

the

of

structured

the nonNon-

offices

a,_ the Deparhnent

respondents

non-

profile

from

the telephone,

interviews

or

The

data

some of the

through

producing

producers

Table

respondents,

and Development

by the research

The secondarydata

three

to _156B comprising

were done

based respondents,

sanpling

bank.

utilized

questionnaires

Manila

random

and

was

is

to them and clarifications

returned

bank;

one

traders; and 12 producers-traders.

respondents

schedule

supplemented

co,_oercial banks:

banking

consists

products.

pure

interview

were

schedule.

data from these banks.

group

export

exporters;

1988 amount

the sample banks.

primary

interview

agencies.

of seven

of the commercial

structured

interviews

of a multinational

of December

in collecting

from these

of concerned

owned bank; one branch one

using open-ended

of

of Trade

guidelines

team.

were obtained available

fr_npublished

to the public

reports,

from government

brochuresand and

private


5

Table [ 1 PROFILE OFSAMPLE RESPONu_Nmb

Assets

A

B

C

Exporter Buszness No of Typeof No Address EmployeesBusiness

Typeof Ownershlp

Year BeganNumber of Years Operation Exporting

Small Scale 1 I 1 I I 1 i I i I I I

1 6 7 R 9 lg II 12 14 17 2g 21

2 3 3 3 3 3 3 3 4 i 5 6

8 It 13 9 3g 7g 15 28 25 48 41 25

x trader x trader both both both both x producer both both x producer both both

corporation single proprietorship single proprietorship singleproprietorship singleproprietorship single proprietorship singleproprietorship s_ngleproprietorship slngleproprietorship corporation corporatlon slngleproprletorsh_p

1988 1982 1983 1985 1982 1981 19B3 198B 1979 1984 1988 198g

3 4 8 nap I 9 nap Ig 5

MediumScale 2 2 2 I 2 I

2 3 4 13 15 22

2 2 2 3 4 I

IBB 2g 3gg 8g 45 42

x trader x producer both x producer x producer both

corporation corporation corporation corporation partnershzp corporation

1973 1981 1987 19Rfl 1983 1974

15 nap 2 nap nap 9

LargeScale 2 2 2 I 3

5 lb 18 19 23

2 1 I i

7gO 4 na 8 lg55

x trader x trader x trader both both

corporation corporation corporation corporatzon corporation

1985 19B6 1953 1983 1974

6 2 3b 5 15

1

NOTE Assets I lessthanP5 m_lhon 2 P5 m_lllonto P20m1111on 3 morethanP_glilhon BusinessAddress 1 2 3 4 5 6 na nap

no answer notapphcable

Metro Manila CebuCity DavaoCity Tagbzlaran City,Bohol BaguloCzty Oagupan City

1 7


6 C.

Existing

Literature

This study has greatly in the Philippines. are

reiterated

mention

In fact, many

in this study.

Action Center

3.

4.

"Export Credit

The

The

Bank, "The Philippines:

August

1988) ;

Ifzal

All,

described

an

Exports

Agenda

for

Staff Paper NO. 4 (September

First Washington

Associates,

Structure,"

report

prepared

for

Asia Region,

the World

Bank

Organization

next

financing agencies and

discusses

policy

Chapter

presents

"Report

of

to

the

to Export

1981);

Sector

Study"

A

(23

Sector

Development

Bank

and

on Philippine the

Export

Industry

(September

Finance

and

Energy

1988).

of the Study

chapter Trade

Office

Approach

Asian 1988);

studies

at this point

from the Philippines:

Reform,"

finance

in earlier

Financial

Economic

A

on export

important

(15 September

and

given emphasis.

private

"Manufactured

raised

A Dynamic

Profile

Philippines.

and

Insurance:

in the Philippines"

World

studies

for Trade Facilitation,

Development

Operations

D.

from recent

It is therefore

Presidential

2.

Finance

of the points

major studies:

President,

shipment

benefited

the following

i.

1970

on Export

the export promotion

environment

III analyzes

forecasts

the Philippine

of exports

from 1989 to 2000. providing

assessed

and fiscal

IV.

incentives export for

THe contribution

non-financial

in Chapter

and demand

assistance Chapter

V

policies

in are

being

structure

since

pre-

and

post-

of government to

the

exporters

discusses

the

and is

export


7 financing and

system

in the Philippines

exporters.

Chapter

export

financing

sions

of

tional

reforms.

II.

system.

PROMOTION

This •• chapter Philippines

all

controls from

a

imported consumer

in response

of the

together

the major

for policy

promotion•

banks

existing

and

concluinstitu-

policies

The trade policy

of fiscal

incentives

during

of

the

environment

is

for exports.•

goods.

This

imposed

assistance. Virtually

exchange

could hardly

favors

and

effectively

proved

dependence

rate and lopsided

Foreign

exchange

penalizing

the

backward

to be an expensive

of primary incentive

exports

structure

exchange

was

feature

could

for the

policy,

linkages

means

rationed

rest

which,

as

stages

of

and exports.

of saving

increased

be

"non-essential"

finishing

towards

resulting

goods

be obtained •for

rewards

nature,

foreign

only producer

over-

inadvertently

difficulty

an import substitution highly

the in

was

strict

became a permanent• policy

fully entrenching

Import substitution while

protectionist

to a severe balance-of-payments

The system

while

up to the present,

the period.

the Philippines

"essentiality."

as foreign

continuing

has been generally

in U.S. economic

to

manufacturing

exchange

evaluation

pulls

export

by a review

degrees

when

necessarily

exchange

the

trade policy

varying

the decade,

such,

discusses

t/_an three decades,

1950,

drop

according

of

more

in

of

Policy Environment

Philippine

began • in

The last chapter

experience

POLICIES

followed

Trade

although

an overall

from 1950 up to the present.

first analyzed

For

VI• presents

finance

the study and •presents a set of agenda

EXPORT

A.

and export

as

iluport

the

foreign pegged

substitution


8

effectively decade,

penalized

even

exports

and discouraged

the strict exchange

balance-of-payments

pressure.

system

the

which

protection, the

was

1950s control

foreign

exchange

achieve. problem.

In Bank

became

preserving

rewarded

remained

while

the

started

1970s,

r_mained

Unclassified

Essential

Consumer

Constm_r

to

be covered.

was

protection

restrictions,

structure.

Escalation

on

were

the

of

of protection

of

linkages

primary

structure,

difficult

to

The

Central

CB

Circular

of c(mmodities Consumer

the motive

a_rding

while

balance-of-payments

adding more for import The

the effect to

classified

(SUC), and

in the domestic market.

tariffs

exports

exports

and

of

restored.

followed,

buttressed

stages

and

protection

to

tariff tool

widespread.

for imports

of cases,

in general, of

effective

by type of product.

More CB Circulars

of local industry

quantitative

in the

(UC), Semi-Unclassified

In the majoritY

the

in the finishing

becamemore

CB approval

(NBC).

the

vulnerable

of classification

requiring

1962,

became more costly

import controls

the system

in

backward

dependent

increasingly

the country

a

the recurring

had to devalue

the structure

In the late 1960s, inloort controls

289 was issued as

saving

Thus,

1957

With the same biases

earnings

not hold down

program

Import substitution

highly

still penalized. exchange

in

but largely

remained

foreign

of the decontrol

system.

Thus, after

of import controls.

promulgated

replacing

manufacturing were

completion

could

By 1960, the government

peso and opted for a relaxation

With

controls

export growth.

stage

imports licensing

system

of the of

Non-

of

tariff

processing

remained.

By bias

the late 1960s, government

against

exports.

Instead

planners

have become more

of reforming

the

protection

aware of

the

structure,


9 however,

export

promotion

adopted in the 1970s.

measures, mainly through BOI,

started

to

be

Clearly, however, such an offset approach could only

reach

a

limited number of sectors.

While

nontraditional

exports

grew,

these

were mostly concentrated in semi-conductors and garments (which

has

low value-added).

The exchange rate policy during these periods did not help reverse the bias

against

received the

exports.

On the contrary, it added to the

penalty

by exports by fixing the rate at unrealistically low levels.

50s and the 60s, this was made possible, by import controls

tariffs.

In

the

(which• cannot underlying

late 1970s up to early 1980s,

the

huge

In

and

foreign

high

borrowing

indefinitely be •sustained)propped up the •peso, hiding

BOP

disequilibrium.

Table II.l shows

nominal and real exchange rate from 1973 to 1987. is

already

the

an

mov_n_ent in

The real exchange

nominal exchange rate deflated by the •ratio between

the

the rate

domestic

price index and the foreign/world price index.

The

Philippines has a history of trying to maintain a

fixed

nominal

exchange rate, until extr_ae BOP •difficultiesmade it impossible to do with

higher

constant

domestic

nominal

Eventually,

rate

inflation relative to has

meant

real

world,

appreciation

the of

relatively the

peso.

the Philippines had to devalue drastically (e.g., 1969,

1983-

-

84). With

an . unrealistically

effectively penalized. or

a

the

so.

services

which

low

(real)

exchange

rate,

exports

Non-tradeables, on the other hand (these are

can neither be imported -- •naturally or

were goods

because

of

government policy -- nor exported) were rewarded, especially non-tradeables dependent on imports •for•their inputs.

Ranking different commodity

groups


REAL

TaDle EFFECTIVE (1973

II.l EXCHANGE = 100)

RATE

Real Year

Exchange

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987

International Key Indicators

aewaau_u

Index

exported

heading

-- composed

of high

mainly

tariff

The next group, which would substitutes

this would belong

readily

reasons

be imported.

penalized,

intermediate

which

The

can other

rewarded is

nor

composed

and capital most

In

which

as bulk and

These are neither

at low duties.

agriculture

the

substitutes

-- i.e., goods

be slightly

(e.g., some

of which are allowed

of import

be

items but are importable.

nor imported due to natural costs prohibitive.

(IFS)

the list would

inputs could

be the ',true" non-tradeables

transport

import

Statistics & DMCs

group,

import ban but whose

local production would

Financial of ADB

uo most penalized

"non-tradeables"

binding

making

Rate

100 83.69 92.17 95.64 98.04 105.32 93.72 88.10 85.91 83.13 102.36 100.03 88.37 112.03 111.10

Source:

import-dependent

Effective

goods)

penalized

is a large net exporter.

is


11

It

is

thus not difficult

to see how the policies

. import

promoted

import-dependent

achieved,

but given the resulting

production

for

substitution. incentive

the small dcmestic

market

There

structure and

in

the

was

which

past some

highly

penalized

have growth

rewarded

exports,

growth

could not be sustained.

Perhaps, incentives penalty

recognizing

were

arising

By

the

structure various

granted,

end

of

incentives

the 1970s,

more

launched

First,

the Tariff

schedule

of import licensing

uniform

additional

import

as planned.

with the 1983-1984

TRP

structure

remained to exports

Achievements

while

efforts

the

surcharge

Of

the

huge

approach

Thus,

reform

protection

of

in the

was formulated.

which

was eventually

liberalization

through

1981,

Second,

Except

removed,

had to be

the

protection

(TRP) was impl_amented.

liberalization

rates

reduced

shelved,

not only nominal

(EPRs) as well

the same but at lower

(see Table

levels.

has been

reduced

derived

from the TRP would

were done

import barriers

protection

and more apparent.

Reform Program

Import

biases

of an offset

the first major

has substantially

protection

similar

offset

export

a

for the the

TRP

however,

BOP crisis.

effective

penalty

the inherent

and the inadequacy

system.

The

in the 1970,

but these were not enough• to

became

finally

proceeded

starting

from the exchange •rate policy.

was recognized

gover_nent

these constraints,

structure

in import

II.2).

Consequently,

but

the

The

EPR

relative

after TRP.

be totally

liberalization.

are being maintained

but also shift

tariffs

nullified

Reduction

in

would not only retain

the foregone

tariff

revenue

to

if

no

tariffs the

old

private


12

AVERAGE

Table EPRs

II.2 (in percent)

Pre-TRP

All

Sectors

24

i_

Exportables Importables

-3 44

-: 25

1

-i

40

23

1 50

1 33

Primary

and

Agriculture

Manufacturing Exportables Importables

Source:

rents.

Tariff

Thus,

simultaneously

In

a

610

banned

crisis, and

more

CB Circular

items were

liberalization

of import liberalization

was

planned

liberalized.

However,

were

in 1983, 48 items were removed

from

exchange

grain

imports

products.

Lesser priority and pre-paid

to

through

to

exchange

payments

for exports

items were allowed import L/Cs.

response

all foreign

allocation

and raw materials

in

CB

items.

circulars

970 was issued pooling

foreign

was implemented.

263 items from the list of banned

In the second half of 1983,

essential

importations

import

more importations,

list.

limiting

of

in 1981, removed

issued to regulate the

schedule

in 1981, a schedule

stage,

1982,

Commisslon

with the TRP.

Starting The first

Post-T

and

for

the

receipts

crude

vital

BOP

oil,

domestic

a scheme of no-dollar

The con_nitment to liberalize

stayed

i_/ The EPR for a certain industry measures how much increase, in percentage, in the value-added brought about by protection. For example if DVA is the value-added given tariffs and import controls and FTVA the value added without tariffs and import controls, then EPR = DVA/FTVA - i.


13 through,

albeit

Revolution.•

not. without

controversy,

The new government

after

liberalized

more

the

February

items between

1986.

March

1986

L.

and

April

1987,

1988.

and

around

129

80

These

Some 951 items were

items in •1988.• The number

percent

of the total number

are summarized

remain

liberalized

regulated

in Table

representing

II.3.

so

in 1986, •171

far

regulated

liberalized

based

As of December

less• than 12 percent

on

items

in

comprises

CB

circulars.

1988, some 673

of the total

items

number

of

the impact

of

items.

Some tariff the recent appear

import

to

tariff •

liberalization

be minimal

average

As

adjust_aents have been made

shown

•to efficient

even

indicated Table

be

growth,

neutral,

On the whole,

by the almost

however, • these

unchanged

(unweighted)

iI.4.

the exchange

not protection,

but neglected

export-led

least

in

experience.

already •mentioned above,

been one of penalty,

an

as

to help smoothen

rate policy

in the past

to not only the export

import substitutes.

With

if not actually

according

sector but also

the current

it is imperative •that the exchange

rate

"protection"

has

thrust

of

should

at

to

exports

and

the

1983-84

BOP

import substitutes.

After

a

series

of de facto devaluations

following

2_/ crisis,

a real depreciation

up slightly real

price

in 1985 but with of the peso

of the peso could the world

be noted.

currency

(weighted by trade with

The

realignment, major

peso

went

the

composite

trading

partners)

2_/ What is more important than the trend in nominal exchange rate is what happens to the real exchange rate, that is, the nominal exchange rate including effects of"domestic and foreign inflation. (Specifically RER = NER x FPI/DPI where RER is the real exchange rate, NER the nominal exchange rate, FPI the foreign/world price index and DPI the domestic price index) .


14

NUMBER

Total Number Regulated

1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 i988

1892 1926 2031 2032 1771 1438 1988 1994 1924 973 802 673

OF AND

ITEMS NEWLY

Newly

47 34 104 1 2 277 59_ 6 -

Table II.3 REGULATED, LIBERALIZED REGULATED BY YEAR 1977 TO 1988

Liberalized

263 610 48 70 951 171 129

No. of Regulated Items or Percent of PSCC lines

33.5 34.2 36.0 36.0 31.4 25.5 35'.3 35.4 34.1 17.3 14.2 11.9


wN ..__,--,

I-I-I

-'

.

_

_ -

o

.

_

.

..-__

_

.

.

.

i o iii }'i I .,,,,-I

-

- .......

! N

'00 : i;

15


16

again

went down

gain

in 1986 and rising

in the competitiveness

slightly

in 1987. This

of the peso at least

indicates

some

in the recent years

(cf.

Table If.l).

The how

more

revealing

has

fared

it

with

specifically,

Thailand,

the

in

movement

currencies peso/won 1986.

of

from

estimate

again

of

S. Korea, rate

presented

rate index rises

competitiveness

in Table

against

cheaper the

The peso/HK$

peso/baht

the

index

against

real exchange

rose

the baht thereafter

1988.

Taiwan,

B.

rate

Fiscal

of

Authority administered

reviews

by

and

the

in 1985-

only in

to

lose

1985-1986. again

of

in the past three

years.

from 1973 to 1982,

again

some

Thus,

but

competitiveness that of BOP

1973

in

surplus

the peso/Taiwan

has

dollar

substantially.

and analyzes focusing

Board of Investment

(EPZA),

shown,

for Expor_ts

specifically, the

the

rate index has fallen

its long-running

its currency.

index has risen

Incentives

This section Philippines,

to revalue

by

and

a real depreciation

and the index is still below

on the other hand, with

been under pressure real exchange

lost

peso As

won

real exchange

The peso

the

in 1983-84

Korean

is

is shown

but falls again

rate index was falling

in 1983-84.

peso,

competitors,

This

II.5.

in 1983-84

relatively

major

index between

for 1988 shows however

the won.

our

of the

and Hongkong.

1973 index but at least has been maintained

The

aegis

currencies

Taiwan,

the peso became

the peso against

of the competitiveness

the real exchange

real exchange

Preliminary

the

these countries

Hence,

sane

indicator

the

the Bureau

tax

•

fiscal incentives on the incentives

(BOI) and the and

of Customs

duty

for exports provided

Export

under

Processing

exemption/drawback

and the BOI.

in the

It presents

the Zone

schemes first

a


17

TableH.5 " NOMINAL EXCHANGE RATE AND-REAL EXCHANGE RATE INDEX: PHILIPPINES: KOREA, SINGAPORE, THAILAND, TAIWAN ANDHONGKONG 1973-1988 ...................................................................................

YEAR

_-...........................................

Korea Nominal

Sin9apore

Real •

Thailand

Nominal Real..Nominal -- Real

Taiwan.

HongKong

Nominal.... Real. • Nominal Real

__ ................................................................................................................................

1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 i985 1986 1987 1988 p/

0.017000 0,016800 0,015000 0.015400 0,015300 0.015219 0,015243 0.012365 0,011600 0.011681 0,0142"70 0.020719 0:021387 0.023128 0,025180 0,029000

100,00% 2.764900 100.00% 0.327700 90.24% 2.785500 89,47%0.333200 95.88% 3,056500 93,22%0.355700 107,27%3.011300 84.30%0,364700 ,I08.91_ 3,034700 80.99_0,362900 115.85%3.239100 84,16%0,362200 I15.39_3,392800 7574_ 0,361300 105,72%3,507800 "'70,92%0.366800 107.85%3.739300 72,20%0_362100 105,46% .. 3,990700 72,45%0,371300 121,82%5,259100 8'9,ii% 0.483200 118.28%7.828500 90.08%0,706400 97.71%8.45/000 76,90%0.685100 107,17%9,372067 _3.63%0.779250 Ii6.37%9.776900 84,74%0,800908 132.65% I0.490400 85.06%0.834200

p/ AsofAuust1988 only

Source: International Financial Statistics (IFS) KeyIndicators ofDMCs ofADB

100.00% 0.176600 100.00% 1.311800 100.00% 92.55% 0,178600 115.30% 1,337000 82,.88% 95.98%0.190700 119.60% 1.467500 86.35% 96.73% 0.195800 118.51%1,517100 87,04% 95.75%0,194800 116.91% 1,58790089114% 95.95% 0,198800117.22% i.57220086.83% 87.12% 0.)04_700 " It0.07% 1.41470075.29% 89.81_ "t0.208600 I13.05%1,509400. 74.97% 88,30% 0,214400119.81% 1.41250070.93% 86.19% 0.218300 .113.42% 1,406500 70,88% 106.71% 0.277400134.26% 1.52800076,91% I03,17_ 0.421700136.43% 2,13600075.03% 78.74% 0..468900 119,33% 2.88300086.32% 90,42% 0.539967137.93% 2.61360080.04% 91.68% 0,651375 162.34% 2.66940081.42% 90,92% 0.740100172.67% 2.702000 --


18 theoretical

framework for the design of an optimal incentive

package

for

exports, and then describes and evaluates the existing fiscal incentives to exports.

1'0

The

Theoretical Framework

rationale

for

the

provision of

export _ incentives

is

better

understood by taking a closer look at the bias against the export

activity

relative

exports,

B, from

to the import substituting activity.

This bias against

is defined as the proportional difference in the domestic i_port

substitution

(Balassa 1971).

and the domestic

value

added

value

from

added

exporting

Thus, is V

d B

=

1

(i)

X v

d or

is (I+T ) -

a T ii

i

B

=

- i

(2)

X

(I+T)

-

a T ii

is where

v :d

is

domestic

value

added

in

import

substitution

industry, X

v

is domestic value added in the exporting industry, d

is T

is

implicit

tariff

rate on

the

substituting activity in industry j,

output

of

the


19 x T

is

the implicit

exporting a

is

the

tariff

activity an%ount

rate on the output

in industry

of

of

the

j,

intermediate

input

i

used

to

i produce

one unit of output

and

3__/ T

is the implicit

tariff on input i.

i

B

is

implicit

positive.

tariff

is negative

on output

This measure

substitution,

zero.

The

reduces trade

first

removal

of tariffs

added.

It

exports

the

on exports

(it

tariff on

structure

perpetuates.

the

on all imports.

of the first term

implies

this

that EPR

is

inputs

relative

to

This anti-

expression

way of achieving

and restrictions

also

is a subsidy

the implicit

reducing

and denominator

for

on exports,

best and most direct

both numerator value

by

that

the penalty

that the protection

bias can be eliminated

there

tax) while

represents

export

outright

from the fact

is zero unless

if there is an export

are positive. import

This results

in

(2)

is

by

Doing

to the

this

in (2) to the free zero

for

all

is.

J Alternatively, results

of

low and uniform the first option.

timing/sequencing considerations the then

issues,

indicate

short run or even compensate

on output

tariffs

etc.)

on all imports will approximate

However,

both economic

as well as noneconomic

(adjustment (political,

the costs, etc. )

that the first best approach may not be feasible in the medium

for the bias against

term.

The second best solution

exports

and exemption/credit/drawback

via a combination

of

in

would subsidy

on taxes on inputs.

3_/ The implicit tariff is the ratio of any given commodity less one.

of domestic

price

to border

price


2O The

appropriate

combination

of

instruments

in

this

second

best

scenario suggests itself if we take equation (2) and ask ourselves what can

do

to

domestic

value added in the

exporting

activity

we

(i.e.,

the

the denominator of the first term) to make it equal to domestic value added in

the

term)

import substituting activity so as

to

(i.e., the numerator

remove the bias against exports.

And

of the

the

first

answer

is:

X

si_itaneously

and all T s in the i and augment the resulting value added by an In

other

reduce T

words,

structure

the bias against exports

activity

to

amount equal to arising

fr_n

the

exporters

and

capital)

at

world market

prices

and

protection

by

inputs

providing

the same protection or incentives accorded to producers

import substituting industry.

zero

EPR (vj).

nay be counteracted by giving export producers access to

(intermediate

added

exporting

in

the

The first adjustment equates domestic value

in exports to free trade value added while the second one

makes

up

for the disincentive against exports relative to import substitutes.

2.0

Analysis of Fiscal Incentives to Exports

Given the perspective outlined above, we are now ready to evaluate the existing employs

package a

of incentives to exports.

At present,

the

number of schemes all aimed at providing free trade

Philippines status

to

4/ "Providing access to inputs at world market prices" entail the following: (i) tax and duty free importation of intermediate inputs and capital equipment for use in export production, (2) a rebate to exporters equal to the implicit tariff times the free trade value of locally sourced importable inputs and (3) a rebate to exporters equal to the implicit tariff times the free trade value of the traded goods content of non-traded intermediate inputs, in addition to the elimination of import and foreign exchange restrictions on imported inputs. The second and third adjustments are necessary once one recognizes that tariffs drive the domestic price by the proportion T relative to the border price. An alternative to ita_s (2) and (3) would be the provision to indirect exporters of access to inputs at world market prices.


21

exports

in terms of •their• intermediate

detail export

in

Section

producers.

2.1

To

to Intermediate

ensure

government

that

as• far

on

following:

importing

Exporters

export

•intermediate

manufacturing

production drawback

scheme

EPZ

are

enterprises

restrictions

that

Furthermore,

administrative

For

procedural

from

otherwise

of tax and

duty

via

any

instance,

The processing

wishing

Also,

3-78

tariffs,

taxes

non-CIF

and

by EPZA on each

(i) (2)

other imports.

of

these

to • non-EPZ a five

when they

consignment

cost of imports

the •

and

importation

by three doc_,ents

On

•their

with

(3)

modes:

apPlicable

comply

(2)

inputs used

(BOC);

on

the

and

(CAO 3-78).

of Customs

imposed

of

(EPZ) ;•

the following

to import under

fee charged

zone

intermediate

to those

enterprises

supported

exporters

documents.

EPz

be

one

_acilities;

•procedures covering

simplified •• relative

requirement

other •13

might

exempt

the

themselves

Order

of the Bureau

concerned,•

duty

on imported

scheme of the •BOI.

are highly

is

foreign

as tax and

(B_)

may be obtainedunder

their

as well

inputs

warehouse

fixed drawback

low.

in Section 2.2.

with

•locating in an export processing

tax and duty drawback

individual

least

•incentives

Prices

input cost

may avail

•under Customs •Administrative

other hand,

while

to

Market

•tax and duty exemption

imported (i)

bonded

firms.

various

are competitive

as intermediate

mechanisms.

exemption

firms

in

and analyzed

Inputs at World

exporters

administers

drawback

in

are reviewed

These are discussed

Description

•counterparts

using

BOI •and EPZA also •grant

•In turn, these

Access

2. i.1

2.1.

•input use.

of EPZ

shipment

step import

r:cd

at

firms

is

is no

more


22

than

_200

ranked

(DTI 1988).

second

In terms of value of

amongst

exemption/drawback

firms

systems

materials

from

establishnent are:

(i)

least

of

BOC.

a _

facilitates

The

number

BOI registration,

70 percent

of

system allows exporters

It also

the

availed

EPZ

enterprises the

various

(WB 1987).

The bonded manufacturing free of tax and duty.

that

exports,

the release

documentary at least

to import inputs

requirements

15.

and the firm's

of imported

Foremost

of its output with a minimum

for

amongst

commitment

raw

to

the these

export

value of US$1

at

million;

5/ (2) B_

"formula operations.

regarding are

_200,000

to

affecting

guarantee and

all

certificate

While

access

(3)

re-export

warehouses

of B_s

and medium

requir_nents

of the BMW

compliance

to B_s

by making

copy of feasibility

(see Table

payments

fee of Iz45,000;

of non-availability

small free

imports

(3)

The following

taxes and other charges

Finally,

firms,

condition

supervision

Bt6Ns;

;

are also specific

to operate.

annual

duties,

There

the physical

costly

fixed

duty

of manufacture"--

with

a performance

the

laws

are required

met B_s

(i) bond

a of

regulations

to the amount

have been

due

to be covered

of

otherwise. by

a

BOI

substitutes.

tend to be effectively

l_mited

to

may import raw materials

use of the facilities

(CCBWs) operated

and

of

be

II.6).

(2)

that would

exporters

to

are required:

bond equivalent

of local

study

of customs

by the Philippine

common

International

large

tax

and

Donded Trading

s_/ The "formula of manufacture" consists of physical input coefficients endorsed by the National Institute of Science and Technology (NIST) and differentiating between domestically produced and imported inputs.


23

DOCUMENTARY

WITHOUT

AND

Table II.6 REQUIREMENTS FOR

OTHER

ESTABLISHMENT

OF

BMWs

SUBCONTRACTING

i.

Instruments evidencing covering the proposed

2.

Plant location property;

3.

Plant layout showing and describing the size and construction of the proposed warehouse together with the intended use of each room, Section or compartment as well as the surrounding premises;

4.

Flowchart processing;

5.

Certified the SEC By-Laws

6,

Certified the BTRCP of

absolute warehouse;

showing

showing

means

the

ownership

of

nature

access

of

the

true copy of Registration together with the Articles of Co-Partnership, as the truecopy and BIR;

of

to

work

Registration

8.

Certlfied the BOI;

9.

BOI Indorsement of issues the license

the application (for to operate a BMW);

10.

Copy

of

Inspection

Permit

II.

List

of

articles

12.

List

of

all

13.

Formula of Manufacture, to be exported;

14.

Building

15.

Copy

raw

project

of

manufacture/

with

equipment;

copy

of

to

be

Certificate

from

of

the

Registration

with

garments,

Electrical

GTE_

Department;

manufactured;

materials

(Mayor's)

contract

the

Certificate

List

true

lease

Certificate with of Incorporation and case may be;

7.

of

machineryand

or

to

be

patterns

Permit; feasibility

imported; or

sketches

of

articles

and study

of

BMW

operation.


24 WITH

SUBCONTRACTING i.

Name

2.

Copy•of

3.

Certificate of accreditation of the subcontractor, if already accredited by BOC; if the subcontractor selected is not yet accredited, •a letter of application of the subcontractor together with other documents required for the application;

4.

Flowchart showing the subcontracted; and

5.

List

PHYSICAL

of

subcontractor; contract

of

with

materials

_o

the

subcontractor;•

specific

De

processing

stage

subcontracted.

to

be

_

CONDITIONS

i.

Plant Location an accessible officials.

2.

Compartments a.

b. c.

d.

The place to

for

proposed BMW snail be ensure easy inspection ••

located in by Customs

Materials/Articles

Every BMW shall nave permanent compartments separated from the premises to be used exclusively for the storage and safekeeping of all imported materials, finished articles ready for export, and by products/wastages; The compartment shall be properly secured to prevent any unauthorized person from having access thereto; Such compartments shall each nave two locks: thekey of one lock shall be kept by the Customs bonded warehouse officer at all times and the key to the other lock shall be kept by the operator; The contents therein shall be properly arranged to give all practicable convenience to authorized Customs official making the required examination, inspection or inventory.

3.

Office Space for Customs Personnel adequate office space shall be provided personnel to be assigned at the BMW.

i.

Supervision

2.

Performance

Accessible for the

and Customs

FEES fee Bond

compliance 3.

Source:

Re-export and other

DTI,

with

equal in laws

to the and

P45,0_ amount

of

regulations

bond equivalent to charges that would

(1988).

per

annum.

P200,000

to

affecting

the amount otherwise

guarantee BMWs.

of duties, be due.

taxes


2B Corporation

(PITC),

Mindanao

Textile

(Manufacturers) Royal

essentially

Exporters,

Inc.

are generally

to

comply

certification of

duty

chunk

CA03-78

(i)

Tariff under

and Customs

to

have to subnit follow

importation

calls

posting

of a re-export

BOC, etc.

the

BOI

They also

and

the

BOI

and the posting

account with

for

the

access

to

and taxes

on

importing imports.

have to satisfy

the

to Drawback

and Warehousing

Firms wishing

II.8).

However,

for

and

producer, of the

incentives

benefits

under

requirements

the

Like the

release B_N

of manufacture

the necessary

be

following:

the

to avail of

for the suL_nission of a formula bond.

To

schemes

(TCCP) or

procedure

iI.7 and Table

raw

i;500,000 and _5 million;

nu_aerous (exactl_ 19).doc_r_ntary

Table

CAO3-78

with either

with the BOI as an export

a rather c_nplicated

(see

imports.

exporters

Code of the Philippines Law.

The

and CCBWs

medium

exporters

not be registered

the _abroidery

CAO3-78

and

must be between

they have access

of

manufacture"

B_s

CBWs fee

of local substitutes

frQn duties

to this privilege,

nor should

operate

and

1987).

small

consignment

they must

of

Inc.

for a service

(in terms of export value)

(WB Report

their total assets

(2)

"formula

of exports

exempts

on

eligible

by the BOI, NACIDA,

bond requirements.

free imports

materials

the

that

of CIF value

to be registered

of non-availability

the re-export

biggest

and

with

Entities

Integrated

Garments,

of small exports

percent

required

or NACIDA or to be accredited have

(RUC).

(Philexport),

Philippine

(PIE), Red Flower

Corporation

from one to five

Foundation

(Mintex),

serve as import agents

ranges

exporters

Exporters

Corporation

Undergarments

that

Philippine

of

scha_, and

re-export

the bond


26

Table II.7 REQUIREMENTS IN APPLICATION UNDER CAO 3-78

DOCUMENTARY

i. CB

IMPORT

AUTHORITY

Requirements

for

FOR

DUTY

EXEMPTION

(IA)

issuance

of

IA:

i.i

Copy of the Certificate of Registration with the concerned government agency, such as the BOI, GTEB, PITC, or CB; in the absence thereof, a Certificate of Qualification from the BOC;

1.2

Copy of the processing agreement between consignee and foreignprincipal or supplier, or the confirmed purchase order or export L/C;

1.3

For regulated items, commodity clearance appropriate government agency;

1.4

Proforma

1.5

Mark-up Computation Report approved by the Department (this requirement can be waived shipment).

Invoice;

RequiretRents

for

from

the

and CB Export for the first

MCR

1.5,1

Copy of Processing Order (PO);

1.5.2

Copy of Certificate of Registration as export producer with the BOI, CB, GTEB, EPZA or other government agencies (for new applications); or Copy with

1.5.3

of Certificate any government

If the on the source

Agreement

of Confirmed

of Qualification agency);

Purchase

(if not

registered

product's quantity and/or fee/billing is based PO, Agreement or other documents - copy of document; or

If the product's quantity and/or fee/billing is estimated explanation on how the estimated'were derived, i.e., assumptions used, basis of assumptions and supporting documents/computations, if any;

-


27 1.5.4

If the quantity/cost the invoice or other

of the consigned documents -copy

materials of source

is based document;

on or

If the quantity/cosÂŁ of consigned materials is estimated explanation on how the estimates were derived i.e., assumptio_ used, basis of assumptions and supporting documents/ computations, if any; and 1.5.5 2.

BOI

3.

Re-export taxes and

4.

Certificate

Formula

certificate

ofManufacturesubmitted of

Requirements

one

and

Qualification

for

the

Bureau

of

Customs.

non-availability

bond equal to other charges. of

to

one

half

times

the

ascertained

duties,

(CQ)

CQ

4.1

Authentic copy of importer's Certificate of Registration with the SEC, and the copy of the Articles of Incorporation or Articles of Co-Partnership, for corporations or partnerships; and Certificat_ of Registration with the BTRCP (formerly BDT) for sole proprietorships;

4.2

Financial

4.3

Certified importer

4.4

Formula of Technology

4.5

Plant's

4.6

Sworn i.

Source:

Statement

certified

copy of a and foreign

by

the

BIR;

valid and subsisting supplier/buyer;

Conversion certified by the or any appropriate government

location Statelnent

map; stating

Department agency;

between

of

the

Science

and

and the

That the materials are and are solely intended purposes, based on the supplier/foreign buyer.

following: to be imported for commercial design/pattern

Procedures materials;

iii.

That the applicant does not have the financial capacity to make prior payment of the Customs duties, taxes and other charges, or doe.s not have the necessary resources to establis and operate a bonded manufacturing warehouse.

(1988).

followed

in

the

on consignment basis, export or sample prescribed by the

ii.

DTI,

to be and

contract

production

of

imported


28

PROCEDURES

The i.

following

are

The

importer

a.

Import

b.

Copy

the

of

the

Table II.8 THE RELEASE OF UNDER CAO 3-78

procedures

submits Entry

FOR

to

and

the

its

in

the

Entry

IMPORTATION

release

of

Processing

supporting

the

importation:

Division

documents;

the

following:

and

CQ.

2.

The Entry Processing Division processes the entry and stamps the name "SMALL SCALE INDUSTRIES" and forwards the entry to the Special Assessment Unit, Bonded Warehouse Division, Port of Manila (POM), or the Warehousing Unit, Assessment Division, Ninoy Aquino International Airport (NAIA).

3.

The a.

4.

5.

Special

Assessment

Undertakes to existing

of

Warehousing

Unit:

an examination and appraisal rules and regulations;

b.

Verifies are the

c.

Adds the quantity of raw materials imported the quantity specified in the contract was

d.

Transmits

The

entry

to

the

Bonds

as

on

the

basis

a.

Checks if there importations;

are

due

and

demandable

b.

Checks

ordinary

re-export

c.

Transmits entry Unit, Collection Cash

and

approves

Division

of

Liquidation

Receives entry and or Gatepass (NAIA);

b.

Forwards the same the Office of the house, NAIA; and

to the Bonded

c.

Returns Division,

to the Special the Warehousing

DTI,

the entry POM, or

(1988).

issues

declared

shipment

in

to not

the

pursuant

entry

date and exceeded;

documents

checks and

if

documents

presented:

bonds

from

bonds; POM,

previous

and

or

the

Liquidation

Unit:

a.

Source:

the

to the Cash Division, Division, NAIA. or

the

Division.

Division,

The

Bonds

if the imported materials ones specified in the CQ;

of

Permit

to

Piers and Warehouse

Deliver

Inspection Supervisor,

Imported

Goods

(POM)

Division, POM, or or the PAL Ware-

Assessment Unit, Unit, Assessment

Bonded WarehoUse Division, NAIA.


29

under

CA03-78

is one and a half times

that required

under

the

B_

scheme.

The

requirements

presented

in

requirements

Table

is available

paid

the

are

based

requirements

drawback while

registered

limited

in place, enterprise

under

following

inputs,

days

under

this

of

system

documents.

of duties

sch_ne

and

the number

added

taxes

added

based

the

drawback The

for firms to benefit

from

to

by

(see

both

II.10).

and

non-B01

items

(WB Report

(VAT) system

This implies

Table

BOI

of export

covered

that is currently

that a VAT

output

from the date

The tax

of filing of claim

the end of each quarter.

is

1987).

registered

but it can

tax paid on imported and locally

in export manufacture.

on

BOI.

in 1987)

tax

are

the fixed

set

simple

is available

225 items

under

rates

to be followed

are zero rated.

used

are

certification

drawback

tax credits

predetermined

under the Value

materials 60

the individual

producers,

for value

are

schemes

of necessary

99 percent

will have no taxes on its exported

a tax credit

within

and BOI

sch_ne

may be refunded.

(e.g., only

exports

other

Tax credits

system are relatively

this

export

Finally,

raw

on

the BGC

the

of manufacture

and procedures

fixed

rather

refunds

usage of imported

However,

with

out that at most

on imported materials

scheme

Common

of local substitutes.

should be pointed

actual

claims under

from 7 to 30 days upon submission

While

the

II. 9.

on the formula

non-availability

It

for drawback

refund

which

is

claim sourced is

20

due days


30

Table REQUIREMENTS

i.

Import

documents;

2.

Export

documents;

3.

Bank

credit

export

or

similar

BOC

DRAWBACK

document

CLAIMS

evidencing

remittance

of

proceeds;

4.

Abstract

5.

Certificate

of

imported 6.

memo

II. 9

FOR

Formula

record of

No.

i);

non-availability

materials of

(Form

for

manufacture

of

regulated or

competitive

commodities

conversion

substitutes under

issued

by

CB

DOST

for

Circular

or

other

the 1029;

related

agencies; 7.

Certificate

8.

Constructive

Source:

of

exportation

exportation

(Form documents

No.

ii), (for

if

required;

indirect

and/or

exporters);

a.

Purchase

b.

Sales

c.

Deliverl

d.

Certificate of Bonded Warehouse

sales and Division

delivery confirmed by a Chief of (Drawback Form No. I-A); and/or

e.

Certificate of Form No. 1,B).

sales

delivery

DTI,

Order; Invoive Receipt;

(1988).

and

confirmed

by

EPZA

the

(Drawback


31

Table REQUIREMENTS

Documentary

AND

II.10

PROCEDURES

FOR

Export

2.

Bill

of

3.

Bank

Credit

4.

A statement

DRAWBACK

invoice; Lading; Memo;

and

under

oath

and

stating

duties

have

that:

a.

Taxes

b'

Said and

raw

c.

Said from

raw materials/supplies were date of actual exportation.

Procedures

for

been

paid

materials/supplies

Availment

of

on

are

Standard

the

not

purchased

2.

If the documents with the Cashier. for completion.

30

Tax and

5.

6.

are c0mplete, Otherwise,

The Analyst Certificate the standard

(TCA) Analyst.

applicant docwaents

is

The deputized representative of sign, the TCC's in the following The representative credits against

b.

The representative signs tax credits

The TRC working

Source:

DTI,

preferential

within

one

year

to

the

industry

Report and issues a computed tax credit

the BOC manner:

of. the Customs tariff duties. of the against

the required documents Records Section of

and

the

BIR

Commissioner

Commissioner value-added

to

fees applicant

group

Tax Credit based on

the

signs

of Internal tax,

releases the TCC to the supplier/applicant within days from the time the application is officially

(1988).

rates;

(i)

pays the-application are returned to the

forwarded ..

prepares an Evaluation (TCC) amounting to the rate.

a.

materials/supplies;

Rebate

Importer/claimant files application including with the Tax Rebate Center (TRC) through the the BOI.

Credit Application evaluated by the

raw

enjoying

i.

4.

SCHEME

:

Requirements

I.

FIXED

Center

the

tax.

Revenue

two (2) accepted.


32 2. i. 2

Assess[nent

The of

fran_work

providing

above

free trade status

restrictions except

outlined

on

those

inputs.

located

suggests to exports

Contrary

of domestic

This

is over and above

imports

pending

The

complete

substitute

and duty

footnote

4)

is

different

exenlotion and drawback

It should

be emphasized

the

price

direct While

and B_;s

imported the by

free exporters

inputs,

no means BMWs

stringent not

since

than those

bond.

it minimizes system.

CCBWs have

also

by in

of the

place.

of small

Locating

costs

of

paying

the

to other

of CCBWs

in an EPZ distorts into

is

small

introduced

a

materials.

taxes

and

duties

on

with this

system

in

procedural

bonds

are

more

using BMWs are

and to post

coL_mendable

a

re-

development

inherent

laudable

are

requirements

these

exporters

exporters some

both

importing

schetnes but where

account

and re-export

of manufacture"

the bias against

1

values with the majority

fees and performance

The operation

(item

effectiveness

costs associated

a "formula

on

account

in other countries

to submit

of

all of these

frorc actually

relative

restrictions

that are currently

In the Philippines,

are simpler

required

export

&%tall.

of

(Medalla 1989).

least if one takes

the financial

exporters

schemes

(transactions)

form of supervision

for

B_

indirect

systems

(WB 1987).

inputs

import

raw material.

of raw materials

that in practice

excluded

of imported

general

degrees

of exports,

of

all

for the imported

free importation

for less than 50 percent

component

to get a BOI certification

the more

met with varying

effectively

precept,

import liberalization

tax

exporters

is the absence

to this

in an EPZ are asked

non-availability condition

that an important

in

the

innovations.


33 For instance,

Philexport

lieu of a re-export

CAO-3-78, exports,

appears

the issuance of a post-dated

is rendered

was instituted ineffective

in support

of small • and

by •the complicated

and •the •implied high transactions

to

check

in

bond.

which

requirements

allows

be no rationale

for the nigher

medium

administrative

Cost.

re-export

Also, bond

there required

under CAO 3-78.

The drawback

system under •the BOC and the BOI, on the other

entails

additional

working

capital

due

and

the

c_aplicated drawback

cost

in terms of the implied

used to pay

the duties

concomitant

system

While

is also •rather

the

these schemes

primarily

export.

over an

the drawback efficient

produce

both

exporters

Rhee input-output effective the

other

the

B_W_s

are better

the

refunds

are

arising

from

included

and

the

in the fixed

suited

CCBWs

cannot

to firms that

At • the same time, the edge of

the

Thus, one •cannot escape

exemption

system

if one hopes

for

domestic

and

for these type of exports

•in the medium

cost on

limited.

are obvious.

the

costs

The products

advantages . of

underestimated for

and taxes before

transactions

import administration.

interest

hand,

will become

produce exemption

the need

to encourage

export

markets,

be

firms and

increasingly

for that

marginal important

term.

(1984) asserts coefficients

that for

import administration hand,

notes

the regular exports

publication

is an

for exports.

that the determination

of

important

up-to-date element

in

World

Bank

(1987),

on

of

the

formula

of


S4 manufacture

appears

hoc basis

zero

•requisites

of

canponent

of

rating of exports

the implicit

is not taken

is also not accounted 4 met under

is interesting

to note

local

that is provided

Code,

set on

an

ad

content

the

indirect

tax

produced

involved

in the

traded advance

into consideration.

The

for in this adjustment.

the various

sch_aes

that the tax credit equal to exporters

(i.e., BP 391) may be viewed

addresses

the

domestically

cost of capital

of VAT on raw materials

item 3 of footnote

partially

4 as it rebates

tariff for

the holding

import duty portion is

under VAT

item 2 of footnote

although

payment

and is usually

in the Philippines.

The

inputs,

to De unsystematic

Nor

discussed.

to 10 percent

It

of

net

under

the old

Investment

as addressing,

albeit

partially,

6_/ the

duty

component

unfortunate

of item 2 and all of item 3.

that this provision

was dropped

with

Therefore,

it

the promulgation

is of

the new Code.

7_/ 2.2

Export

2.2.1

Incentives

BOI and EPZA

Description

Incentives inducements enactment

under

to

exports

have been in force of Republic

in

the form

of

investment

in the Philippines

Act 6135 or the Exports

since

and

1970 with

Incentives

Act.

other the Since

6_/ This adjustment is less than that which is required because 10 percent is less than the average tariff on intermediate inputs which stands at 25 percent in the eighties (Tariff C_rmission).

7_/ In addition to the special treatment of i_ported materials and equipment in EPZs that effectively establish a free trade regime for •exports, EPZA grants the sane incentives to exporters as the BOI so that in the discussion that follows when we talk of BOI incentives we also mean EPZA

incentives

to exporters.


35 then,

it has been amended

changes

introduced

under

truly

radical

since

been superseded

Investments

A is

and deserve

presented on

holiday

Batas

a

importation

II.ll.

duration

and non-exporting

(BP 391)

226

However, in

1983

the fact that

it

(EO 226) or the

granted

the were has

Omnibus

frcm 3 to 8

226

on

tax

by the

income

tax

years.

Duty

is made available

EO 226 while

and E0

the provisions

and net local content

that ranges

under

under BP 391

EO 226 replaces

equipment

firms

391

despite

Order

of the incentives

of capital

times over.

(OIC 1987).

net value earned

for

Pambansa

by Executive

in Table

three

some comment

Code of 1987

comparison

credit

and codified

to both

this privilege

free

exporting

was

granted

8_/ to exporting

EPZA the

registered

other

project so

firms only under

hand,

at

firms produce

BOI registration

is included

listed,

BP 391.

solely

may be obtained

in the Investment

least

for the export market.

50 percent

of

Priorities its

if

the

On

proposed

Plan or, if it is not

total

production

is

for

is waived

if

propose

to

9_/ export. they

The equity

propose

restrictions

to engage

on foreign

in a pioneer

project

investors or if

they

10__/ export

at least 70 percent

of total

output.

BP 391 allowed pioneer non-exporting firms to defer all duties and taxes on capital equipment while non-pioneer non-exporting firms are permitted to defer only 50 percent of these taxes for a period of 5 years.

9_/ The 50 percent

export

In general, foreign cannot exceed 40 percent.

criterion

was first

equity participation

introduced

in 1983.

in any particular

project


.36

Table II,ll COflPAR_SON OFINCENTIVES UNDER BP391ANDE0226

BP391 Incentive

Domestic Export Domestic Export Producer Producer Producer Producer Pioneer Non-Pioneer Pioneer Non-Pioneer Pioneer Non-Pioneer Pioneer Non-Pioneer

1, ExempLion from duties and taxes on imported capital equipment 2, Defermentof duties and taxes on imported capital equipment5to be repaid within 5 years

EO226

IHZ

166Z

51_

3. Tax credit on domestic capital equipeenL equivalent to duties and taxes on similar

10eZ

1B0_

106_

IU_

N/A

N/A

N/A

N/A

N/A

166_

166%

166%

1BBZ

1B6Z

lUZ

N/A

IUZ

foreign equipment 4, Tax credit on domestic capital equipeentto ,be repaid Nithin 5 years

1N%

1NZ

N/A

N/A

N/A

N/A

N/A

N/A

5, Taxcredit on net value earned for _ive years

IBZ

5Z

lmZ

5_

N/A

N/A.

N/A

NTA

16Z

16_

N/A "

N/A

N/A

N/A

6, Tax credit on net local content for five years

'

a/

a/

a/

a/

7, Tax holiday

N/A

N/A

N/A

N/A

6-8 years

4-7years

6-8 years

4-7 years

8, Net operating loss carry over

Yes

Yes

Yes.

Yes

No

No

No

No

9. Deductionfrom taxable incomeof 56_ of incremental labor

No

No

No

No

b/ Yes

b/ Yes

b/ Yes

b/ .Yes

,

expensefor 5 years

a/ Theseare applicable to newprojects, Expandingfirms are entitled to 3 year tax holiday. Existing fires are not antitied to the tax holiday at all, bi Redundantfor firms enjoyinq tax holiday.


37 2.2.2

Assessment

A

cursory

provided

more

incentives

(1986,

benefits

to exporters

of producers.

II,ll

the

hypothetical incr_nent

more BOI

important

registered

under

differentiates

provisions firms.

Consequently, the

pioneer

the inducements benefits

From the Vantage

Table and

given

Incentives

point

to

the

anti-export

effectively prices. content

under item

under

EO 226.

access

out earlier

2 of footnote

intermediate

place.

tax credit

BP 391 partially 4.

these Manasan

of

return

EO

226 that

that

on the

EO

are reduced

compensating the

of 226

only. by

almost

half double

above,

EPZA/BOI

adjustments

prevailing

trade

importation

to capital

inputs

of

at

that the tax credit

capital

mechanism

at free trade prices

is no

capital

undistorted on net

the adjustment

This provision

to

regime.

for domestically-sourced

addresses

Nor is an efficient inputs

to

enterprises

presented

on the tax and duty free

It was pointed

under

to

bias of

grant exporters

the

shows

non-exporters

of the framework

counteract

as well as the

while

Code.

be viewed as providing

equipment

rate

If.13 indicates

to exporters

may

provisions

391

in

and

II.12

non-pioneer

incentives

EPZA/BOI

developed

of BP 391

Table

BP

is 3 to 4 times as large as that

made available

under the new Investment

that

with respect

the approach

BP 391 while

between

neutral

the impact on the internal

on the IRR of exporters

non-exporters

indicates

than to non-exporters

Following

1988) we estimated of

while

of Table

under EO 226 are perfectly

two groups

(IRR)

examination

longer

that extends

local

called

for

available the

access

to indirect exporters

in


38

0

r.r.1

izl ,-I <_

¢_1 ,--I t-_ I_I

v

_

0 .,-,t

_i

_

_il

,,

i.¢i

m

i.f'l

<_

_4

__ i.__ •

,-4

_.

L_

oo

I.¢i i_-

I

_il

r..-

i._ C_i

_

lpl

_

_ •

,--.I

.4

_-

r.,-

_

_

_0

.

I'_

_

&

_o_

,--I II

_

._

0

i,.l

u,.i

_ ._t

II

_ _ ,-,,-I

?_

..-I

i,-i


CHANGE

IN

THE

INTERNAL

BOI

Table II째13 RATE OF RETURN

REGISTERED FIRMS (IN PERCENTAGE

Non n=10

OF

UNDER EO POINTS)

Pioneer n=20

HYPOTHETICAL 226

_/

Pioneer n=10

n::20

i.

Tax holiday without extension

2.5

1.75

3.5

2.5

2.

Tax holiday with maximum extension

3.75

2.75

4.0

3.0

3.

Duty Exemption on Capital

3.5

2.5

3.5

2.5

4.

1+3

7.25

4.9

8.25

5.75

5.

2+3

8.75

6.0

9.0

6.5

b/

As

in

Table

II.12.

As

in

TaDle

II.12.


4O The

tax credit

partially

providing

framework

since

on net value the

earned

under BP 391 may be

second major

it augments

ad3ushnent

domestic

seen

outlined

value added

in

the

as

in

the

exporting

11__/ activity

by some proportion

incentive

like

exports"

this

one is "the ideal

(Rhee 1984).

This

t_e income" tax holiday

and line 1 in Table

value

earned to

exporters

internal

rate

overstated.

as

First,

estimated

our

life

span.

years near holiday

its inception

is in force.

the exporter tax

sparing

exporting

for

arrangements

their

II.13

on Table

II.13

Table on

impact

on

the

provided

by

the

is

likely

is

based

to

De incurring

losses

the period

and

benefits

the over

in

the

when the

tax

the value of the tax Second,

be

on

profitable

the Philippines

net

equivalent

is uniformly

with

by

holiday

the absence most

from the

to of

capital income

investors.

inputs the

roughly

the inducement

the potential

surm_arize, the combination

for

provide

considerably.

between

nullifies

to foreign

intermediate

compensate

that the tax credit

actually

In this case,

for

of line 2 in

coincides

be diminished

countries

tax holiday

To

would

which

incentive

A comparison

enterprise

The firm might

tax

based

has been replaced

in Table

analysis

asstmlption that the registered its

of

(at least in ter_s of However,

value-added

however,

II.13 suggests

of return.)

holiday

A

form

and the income tax holiday

benefits

tax

incentive,

under EO 226.

II.12

income

of value added.

of the

and BOI/EPZ_

anti-export

Dias

ex_nption/drawback

incentives of

the

is

not

protection

system

enough

to

systeJn.

11__/ The average EPR for import substitutes is 25 percent in 1985 (Medalla 1986). It is considerably higher than the 10 percent adjustment granted by the above mentioned provision.


41 Furthermore,

the

changes

introduced

under

EO

226

exacerbate

this

deficiency.

While declined

the export relative

Investments project

orientation

to

those

Code share

selection.

of the incentives

under BP

the same bias

Consequently,

in the share of exports

391,

under

both

in favor

E0 226

versions

of exports

of

projects

since

the

in terms

there has been an enormous

in BOI approved

has

of

increase

1984

(see Table

II.14).

The

'_asured

selection

was

including on

capacity"

a

feature

potential

(i)

It

potential

and

input

implied

costs

entry

as

criterion

investment

substance

not

might

implies only

when

by limited

output

limitation exports

Thus, on

entry

project

legislations

some

exporters

not be allowed

exporters

in

incentive

are not prohibited.

it will penalize

(2) existing

a

This concept

imports

exporters

overcrowding;

if the two

on

the

BOI

counts:

grounds

will have to bear the (via

are

measured

of

higher capacity

in the upstre_,n industries.

There

has

been some concern

incentives

with

of foreign

investment

(1988)

loses

but also when

it to regulate

concept)

of all

BO 226 except BP 391.

competition.

uses

concept

those offered

compared

countries competitive II.15). comparison,

and

the

EO

226

competitiveness

by the country's

that

each other

the

by other countries

investment

concluded

with Since

implied

about

ASEAN

granted

were

by

the

we can infer that BP 391 incentives

ones

Manasan

the

are

incentives used

BOI

importance

gap.

countries

before as after

incentives

the

financing

incentives the

given

of

ASEAN equally

(see

Table

in

this

are more generous

than


42

_

d

.

_

_

_

.

_ _

Mdd_

_

m

m

._o_

_

_

e,

m

6

"4

_.

..

m

_m

___

_

0


TableIf.15 INTERNAL RATEOFRETURN OFA HYPOTHETICAL FIPM UNDERSELECTED INCENTIVE SCHEMES INASEANCOUNTRIES, I_B8

Indonesia

n:lO

n:20

I, Regular TaxesII,0

13,0

(noincentive) I0,0

12.5

9.0

12,0

2, TaxHoliday

NA

MalaYsia

n:lO

n:20

Philippines

n:10

n:lO

n:20

n:!_

15,0

16.75 17.0

10.25 II.5

15_0

I6.5

ii.25 13,25

12,5

17,0

17.25 12,0

19,0

18,75

20.0

19.0

20,0

1Q,75

t3.5

14,1

15,0

(max, no.of yearsallowed) 4. DutyExemption 15,0 onCapital

5, (2 + 4)

16,5

12.25 12.25 13,75 14.0

NA

13,5

14,0

!5,0

15.0

16.5

16.5

17,0

19,0

IB.5

14.25 15.75 13.5

15,25

15

16,5

19.35

17.35

17,5

17,0

14.25 15,75

6, (3+ 4)

n:20

I0,25 ll.l

16.5

NA

Thailand

n=20

(min,no.of yearsallowed) 3, TaxHoliday

Singapnre

13.5

15,25

15

16,5

14,25

15.75

13,5

15,25

7. Investment Allowance Only (max,allowed)

NA

20.0

16,0

19.25 19.25 18,4

15.1

NA

17,0

17,25

19,0

18,75

20,0

19.0

20.0

19,75

IB.O

18.25

HA


Indonesia

n:lO

n:20

Malaysia

n:lO

n:20

8. (T + 4)

17.7

17,0

9, Export

16,5

16.0

Philippines

n:10

n:20 NA

Singapore

n:lO

n:20

18.0

18.25

ThaiTand

n:10

n:20 NA

11.5

13.5

Allowance Only 10,(2+ 4 + 9

NA

20.0

19.5

NA

17.0

17.5

11,(3+ 4 + 9

NA

20,0

20,0

NA

19.5

19,0

Remoitems' tm

.25

.12

.2

0

.2

u

.15/,25/.35

.40 + .05

.35

.33

.35

t

Th_assumed income stream usedinthesecalculations isthatwhichyields before LaxIReoF .20

a/ Foru : 15, 25, 35_, respectively

b/ special allowance fordepreciation inLaxholiday period,

c/ forI00_export.

Source: Manasan (1988).


45 those

of

other

ASEAN countries with respect

to

export

producers.

Thus, the shift to EO 226 might have reduced the attractiveness of the Philippines •to foot loose export industries. unlike

Also, the

Philippines,

Singapore and Malaysia, does not provide exporters

incentives

based on export promotion/overseas expansion expenditures,

The

sample exporter-respondents were asked whether they received

special incentives from the government.

any

It is noteworthy that half of them

admitted that they have not received or have no knowledge at all about incentives given by the government (see Table II.16).

any

Others mentioned BOI

incentives, exemption from export tax, and some programs of the DTI as most

important

incentives

they have received from

the

the

government.

regards the New Omnibus Investment Code (NOIC), five respondents said

As

the

incentives

contained •therein are better

than

the

previous

that ones.

However,• a great majority of the respondents do not have any knowledge all have

regarding the new incentives given•under the NOIC, hence they any

basis

for comparing them with the incentives

given

at

do

not

under

the

previous code.

•The respondents cited paper work involved in exporting, importation of raw

materials

materials

and machinery, regulations in gathering

locally

available

(e.g., rattan pools), quota allocation system (in favor• of

exporters), requirement

and to

foreign

exchange

proceeds

requirement

immediately surrender all foreign

big the

earnings)

as

exchange

(i'.e.,

major regulations that adversely affect exports.

The

Inter-Agency

Projections

Foreign

Study

Group

on

External

Operations Committee which met

Trade with

Statistics

and

exporters

last

December 1987 prepared a comprehensive summary of the problems

encountered


48

SPECIAL

Assets

A.

B.

Export

Small-Scale 1 1 1 1 1 1 1 1 1 1 1 1

NOTE:

GOVERNMENT

Incentives

NOIC

none regular trade exhibition product exposure none list of direct buyers nave not received any no knowledge BOI incentives, Kalakalan market encounter export sales - exempted no knowledge no knowledge

no

ng from

20

no no

- New

Omnibus

of

eqpt.

BOI under BP 391 none VAT & other tax exemptions no knowledge tax credit on NVE/NIC

i - less than 2 - P5 million 3 - more than

knowledge •better better knowledge knowledge knowledge knowledge knowledge better better knowledge knowledge

not

4 B0I - importation 13 BOI, tax incentives 15 no knowledge 22 no knowledge

5 16 18 19 23

no no no no no

VAT

2 BOI 3 none

Large-Scale 2 2 2 1 3

NOIC

THE

Medium-Scale 2 2

Assets:

NO.

1 6 7 8 9 10 ii 12 14 17 2_ 21

2 1 2 i C.

Table II.16 INCENTIVES GIVEN BY

P5 million to P20 million P20 million

Investment

Code

& mach. no no no

no no no

same aware

same knowledge knowledge knowledge

knowledge knowledge worse knowledge better

•.


47

by exporters policies

III.

and their recommendations.

are reproduced

in Table

chapter

is divided

export

structure

Philippine forecasts

of exports

A.

From exports during

a has

level

but has recovered

steadily

readily

comprised discerned

level declined

more

Using

using different

export

structure

one-digit

rapid

has changed

of

Philippine

growth

occurred

annual

average

substantially

t/qe Philippines By the 1980s,

than half Of total exports. classification

1980s

of natural

44.5 percent

PSCC classification

was still

manufactured Changes

are

principal

percent exports

in 1987.

scheme,

to be very pronounc_d.

resource-Oased

in 1970 to 9

in the top ten

in i97_ to 13.8 percent

are found

These

in the

scn_es.

of exports

from around

29.5 percent

the

level

the first half of the

and inineral exporter.

The share of logs and l_oer

fell down from

presents

financing.

grew byan

Even as late as the mid-1960s,

has fallen markedly

1987.

The most

during

exports

Table III.l shows that theshare sectors

second

_]e

from i986 to 1988.

of Philippine

an agriculture

exports

in 1965, t_e

Of 197_ to 1980 when exports Export

basically

discusses

ExporÂŁ Structure

of 20.7 percent.

last two decades.

the

for pre- and post-shipment

of only US $768 M

The composition

fiscal

AND D_MAND FOR

The first

from 1970 to 1988 while

grown to US $7.1 B by 1988.

the decade

OF EXPORTS

into two sections.

and demand

The Philippine

to trade and

II.17.

PHILIPPINE EXPORT STRUCTURE AND FORECASTS PRE-AND POST-SHIPMENT FINANCING

This

in

Those related

the changes

This

is

in

_le

presented

in


48

TableII,17 SUMNARY OFSELECTED TRADE-AND FISCAL-RELATED PROBLEm, RECOMMENDATIONS AND PROSPECTS DECEMBER INDUSTRY DIAL_UES CONDUCTED BYTHE IASG

INDUSTRY SECTOR

BOTTLENECKS

RECOMMENDATIONS

ABENCY INVOLVED

A.Problems/Recommendation Common ToAllIndustry Sectors PRODUCTIONUnavailability ofcompetitively priced Allow importation ofnecessary raw BOI/CB/DTI andgood-quality rawmaterials inthe materials these arenotavailable locally domestic market, inorder tosustain industries. High cost ofproduction,

Work forthereduction oftariff rates on BOI/DTI imported rawmaterials andequipment in Inadequate technical assistance, technoorder tocutthehigh cost ofproduction. logical skills andbasic facilities, particulary small entrepreneurs or Allow theapplication ofearned creditsBOI/DTI farmers/planters, aspayment foruseofpublic utilities andother taxes tolessen thefinancial High tariff rates imposed onimportedburden ofrising electric power cost, rawmaterials andequipment, water andother taxes, Unreasonable cost offreight bothin Provide moreinfrastructure, transportPresent international endinter-island shipping, ation andcommunication facilities, Administration Inadequate dissemination ofinformation Forge amore effective labor andmanage-DLE/DTI tosmall exporters regarding market mant tominimize labor disputes which may developments andprospects eventually lead totheerosion ofthe competitive edge ofPhilippine exports Decreased production duetotheeffectscheap labor -ifnotgiven theproper ofrecent natural calamities such as direction, drought andtyphoons, Address theprevailing political Present Mounting labor-management problems, uncertainty brought about bymounting Administration insurgency problems, Deteriorating peace endor_rcondition,

FISCAL

Rising cost ofredtape andbureaucracy Promote efficiency inallgovernment Allgovernment ingovernment channels, specifically in channels tominimize thecost ofbureau-agencies theprocessing ofpertinent documents, crecy andredtape andtoeliminate uncoordinated activities ofthe Lack ofinnovative andeffective government, incentives, particularly for small exporters whoarebeing discriminated in Review andrevise/amend existing policies DTI/BOI/DF/NEDA favor oflarge corporations, perceived bythebusiness sector to


49

INDUSTRY SECTOf_

BOTTLENECKS

RECO_ENDATIONS

fiBENCY ]NVOLVEO

Sluggish actionontheCARP hasstalled strengthening structuralsupport at the plansforexpansion anddevelopment of" fiscal level. nost-agri-andagro-industrial enterprises, Request for thegovernment to be,rare Present "pro-active" andpromtiveratherthan adm!nistration reactiveandregulative soasnotto scare awayinves_ts andothergrowth opportunities, Provide a morehealthybusiness environ- Present ad_inismentthrough government andprivate tration and sectors joint efforts inorder toattractIndustry members moreinvestments into thecountry. Rationalize travel taxesi particular)' to DF/DTI/BOI exporters whotravelfrequently to promots/sell their products abroad, Fornulats andprovide appropriate schemesDTIandIndustry to.improve thecometitivsness of members Philippine exports relativeto other exporting countries,

EXTERNAL Stiff competition from producers.who. Reduce oreliminate tariff andnon-tariff OTI/NEDA enjoy better incentives andsubsidiesbarriers through international agreements bytheir governments, withtrading partners. Existence oftariff andnon-taiiff tradeConduct onanon-9oing basis review of DTIandIndustry barriers a(lainst some Philippine current market trends andopportunities members exports, byboth theexport sector andthe government sector. Establish amarket intelligence networkDTI inorder toprovide market information as wellasdata onothercompetitor countries,

PROCEDURALIneffective import procedures/System Improve onimport procedures/system to CB/BOI which delay processing ofpertlnent hasten procurement ofrawmaterial documents, requirements ofmanufacturing industries, Lack ofcomprehensive andeffective classification scheme forso_export products which leads toconfusion in .reporting andpolicy information,

Lessen export documentation process by CB/BOl/Bureau of establishing 'one-stop shop" forexport Custom shipment applications, permits and clearances,


5O

INI}USTRY SECTOR

BOTTLENECKS

RECO_NI)ATIONS

AGENCY INVOLVED

B,Problems/Rec{me_tion.of SpecificIndustries (1) Coconut Products ProductionDecreased production because ofthe Implement andsupervise closely the DA/PCA effects oftherecent natural replanting, intercropping andfertilicalamities like drought andtyphoons,zation schemes inorder toimprove the quality andquantity ofproduction. Deteriorating peace andorder condition in _t coconut-producing areas, Extend theresearch andstudy agreementDA/PCA with theHarvard Medical School to Limited de_estic market forcoconut develop newproducts oruses ofcoconut products which should comIemnt the andtoprovide medical basis against export industry, thesmear campaign ofASA. Introduce innovation andmore _ffectiveDA/PCA drying procedures andtechniques to limit theaflatoxin content found in meal,

Sluggish action ontheCARP hasstalledMonitor carefully theestablishment of DA/PCA plan forexpansion anddevelopment,barangay cooperatives inorder to meximize theuseoffunds, especially in Thegrowing concern over thefollowingthegrass roots level, recent developments inthe.international ... market which would substantially reduce External export .earnings ofcoconut products if Continue thecounter-offensive move DTI/PCA these areallowed totake their course,against thesmear caml_ign undertaken by theAmerican Soybean Association. a) thesmear campaign oftheAmerican Soybean Association against coconut oil Strengthen thelobby against thebills DTI/PCA andother tropical oils being launchedwhich bantheentry ofcoconut products intheU,S., andthediscriminatoryintheU.S, nowpending intheUS bills being debated currently intheUS Congress, i,e. HB2148, SB110g and1699, Congress about thedeterioration ofthe degree ofsaturation ofthetropical Intensify thelobby being staged againstDTI/PCA oils. theproposed imposition ofthevegetable oilconsumption taxinEEC, b) theproposed imposition ofavegetable oilconsumption tax:on local Penetrate other.prospective markets such DTIIPCA andimported oilinEEC. asPRDC, Indonesia andother socialist countries which hold great potentials in c) theproposed stringent measure in order tooffset thelikely negative EECtolimit theaflatoxin content foundImctonthedmndforcoconut products inimported copra mal, duetotherecent developments intheUS andZEC_rkets, Fiscal


51

I_USTRY SECTOR

BOTTLENECKS

..............................................

_--

REOOI4ENDATION$

ABENCY INVOLVED

.....................................................................

(2)Sugar and No]lasses ProductionReduced profitability duetoincreasing Implement acontract-farming scheme SRk/and kssocialabor demands, between thesugar planters andprocessed tionofSugar food exporters, whereby both parties willPlanters Lack oftechnical andfarm facilitiesbegiven afree hand inthedetermination toattain efficiency inproduction, ofprice. Mounting insurgency, Rising cost ofproduction relative to world market prices duetofarm end milling inefficiencies,

Fiscal

Redtapein government bureaucracy increases thecost ofproduction and operation,

External Low.world market prices,

Diversify idle sugar landeto,other cropsDA like ramie, cassava andother root crops tomaximize theuseofland, Accelerate thepreparation ofstudies on BTI/SRA theethanol program andother industrial usesof sugar.

Formulate a comprehensive program throughSRA andIndustry a concerted effort between theprivate members sector andthegovernment, defining the policies onadministration, pricing marketing andfinancing aspects.

Penetrate other prospective markets, SRA/DTI

Continued dependence ondeclining US quota allocation.

.,

Shift inpreference ofAmerican consumers toalternative sweeteners,

(3)Fruits (a)Bananas Production Reduced production duetonatural Enhance production bymaximizing the Industry members calamities such asdrought andtyphoons, allowable hectsroge planted tobananas.

Fiscal Sluggish formulation andimplementation Formulate andimplement thefinal guide-OA/DAR/Congress oftheguidelines oftheCARP which lines oftheCARP toeliminate uncertainstall plans ofexpansion interme of ties that surround itsimplementation and additional hectsrage planted tobananas, enable theindustry todetermine the proper courses ofaction.

ExternalTraditional markets have grown to _turity sonotsuchimprovement in volume shipments tothese markets may beexpected,

Explore orpenetrate newmarkets such DTI asSouth Korea andthePeople's Republic. ofChina tooffset thedeclining Philippine market share inthetraditional Japanese andMiddle East markets.


52

INDUSTRY SECTOR

BOTTLENECKS

RECON_ATIONS ,

A6ENCY INVOLVED

-e

Strong re-entryof Co]uebian and Equadorian exporters to theJapanese market posing athreat onthealready declinging Philippine share inthesaid market, Existence oftrade barrier against Philippine bananas landed inJapan in theform oftariff rates.

Explore thepossibilityof negotiating DTI withtheJapanese gover_nt the reduction oforexemption from thetariff rates imposed onPhilippine bananas in order toease upthetrade ofthe commodity inthesaid market,

(b)Pineapple Products Fiscal Agrowing concern ontheimplementation Work fortheimmediate implementation DAR/Congress ofthefinal guidelines oftheCARP. ofthefinal guidelines oftheCARP. Export-oriented pineapple farming requirelargehectarage andinclusion ofthese farms intheCARP might lead tothedeath oftheindustry,

ExternalThere maybenegative reprcussion onthe Diversify into other potential markets,QTI demand fortheproducts intheU8asan aftermath oftheUSstock market crash, albeit minimal.

(c)Mangoes Production High cost ofairandseatransportation Reduce airandseatransportation costs DTI/MARINA/PAL forcargoes going toU.S. & Europe toreasonable levels inorder toprotect compared tocosts incurred bySouth exporters speedy access totraditional American andAfrican suppliers therebyandprospective markets. impeding thecountry's ability to strongly penetrate U.S. andEECmarkets, Undertake acomprehensive research DA development ofhigh-yielding and Further research isnecessary toproduce disease-free varieties. andexport high-yielding anddiseasefree varieties, Disseminate information regarding the DA/DTI/BOI newtechnology infumigation called the vaport beat treatment toother growers.

ExternalTheimmediate implementation ofthe Negotiation with theJapanese government DTI Japanese banonmangoes having been onhowtocompensate thedrop inNovember treated withEDBresulted inlower andDecember 1987 shipments. shipments inHovember andDecember 19B7,


53 ..............

. ..................

IND_TRY SECTOR

....................................

BOTTLENECKS

d .....

_

RECONME_ATIONS

A6ENCY INVOLVED

(d) AllFruits Production Prohibited importation ofcheaper of- Explore the possibility ofprocurin9 SOl/Ca the-road orutility vehicles, imported andless expensive utility vehicles which arenotavailable locally. Mounting labor probleme, Address tothepresent administration Present Deteriorating peace andorder condition, the concerns onlabor disputes and goverreent national security.

(4)Coffee Production LoW production level due toinadequate Upgrade traditional production and Ok technological andagricultural extension marketing techniques. assistance tosmell farmers. Provide updated information about exportDTI/ICO-CA Inadequate dissemination ofinformation quota allocation and other recent export tosmall farmers regarding export developments toother coffee growers to market developments and prospects, beable togive them anincentive to produce more,

Fiscal

Only thebig traders benefit fr_the quote allotments forexport granted bytheICO-CA.

Implement vigorously theban on importation ofcoffee inany form.

DF/CB

External Exports arelimited toquota markets Develop the potential ofexporting DTI because non-quota counVieshave not tonon-quota countries. yetbeen explored and also because thecountry cannot compete qualitywise andprice-wise. (5)Tobacco Production Low yields toinsufficient technology Undrtake R&Dtoimprove yield and ontobacco farming, quality oflocally-grown tobacco.

DTI/PVTA

Poor quality OfPhilippine virginia tobacco,

Fiscal

Imposition Oftaxes ontobacco products Formulate effective incentives to reduces profitability ofgrowers and mutivate 9rowers andexporters to processors, produce efficiently,

External T)e growing anti-smoking campaign worldwide dampens prospects for growersand processors,

BOI

Develop new market prospects, such DTI asChina which could beinitiated on a9overnmont-to-9overnment basis.


54

IND_YSECT_

BOTTLENECKS

RECO_ENDATION$

A_NCYINVOLVED

(6)Fish andFish Products ProductionLowproductivity because ofthegovern-Implement effectively andenforce DNR/Bureau of ment's inability toimplement strict strictly, fishing regulations toconserve Fisheries marine regulations onproper fishing, thenatural fish resources andmake the industry self-reliant inthelong run. High cost ofproduction inputs such as energy andthe20-11)0 percent import Review theimport liberalization program_I/DTI/CB/NEDA taxslapped onthevalue ofimported inthelight ofitsadverse effects on fishing equipment, theIooa] fish andfish products industry, CeroI]ary tothis, there isaneed to Imported fish products allowed under monitor thesupply requirement offish theimport liberalization program ere canners todetermine theright volume and competing stiffly with local catches, kind ofspecies tobeimported inorder tokeep thelocal canneries' operations Limited capacity ofcanneries dueto going, lack ofsupply ofcannery grade fish,

Fiscal

Lack ofgovernment subsidy and incentives forthefish sector,

External There exists stiff competition from Thailand which gives subsidy toits fishing industry,

(7)Forest Products ProductionReduced logexport earnings because ofthebantoprotect thegrowth of theancillary industries,

Fiscal

Formulate aneffective incentive scheme SOl topromote theindustry,

Penetrate ortapother prospective DTI markets.

Enhance thelocal value added contributed towoodproducts.

DTI/BOI

Inability oftheindustry tooperate Allow theindustry tooperate through DNR/BFD freely because ofgovernment inter- market forces with3ess government vention ontheallowable timber cut intervention. andlogging tobeexploited, Ascertain theduration orthesecurity of DNR Theuncertainty regarding thetenure of tenure ofthelicenses ofproducers/ timber licenses asthenewconstitution planters which will serve asasincentive implicitly prohibits thegrant ofti_er toreforestation andensure increased license agreements, production. Theimposition ofI0%duty andother Work fortheelimination oftheTDIduty BOI non-tariff barrriere such ascontrols on oninimported logs toarrive atamore theimportation oflogs areburdensome, competitively priced manufectured wood product exports.


55

INDUSTRY SECTOR .........................................

BOTTLENECKS

RECOMMENDATIONS

ABENCY INVOLVE@

_ ....................................................................................

Being a partytothejoint venture orprofit/production sharing arrangemnt withthegovernment does notguarantee theproducer thetenureof his license.

External Stiff competition posed byIndonesia,Tapother potential markets andproduceDTI/D_/BOI Sabah andSarawak which manage to better products tocompete with other produce more yields atlower cost. producers;

(B)Furniture and Fixtures ProductionDwindling supply oflocal rawmaterials, Work outascheme providing continuousDTI/BOI particularly _attan poles duetothe supply ofnecessary rawmaterials (specirapid denudation offorests, ficaIly rattan) through importation to suppIemant thedwindling local supply and Inadequate technical assistance, techno - thus sustain theindustry. logical skills andnecessary equipment tosetupoperations. Formulate andimplement aneffective DNR replanting scheme ofrattan po]es, its Agrowing concern onlabor unrest and proper care andhandling whenharvested. national security exerts further pressure tolocal manufacturers. = Encourage integration and/or theuseof BFD/DTI indigenous materials. I11ega1 exactions byrebels andmilitary personnel atforest concessions increase Conduct training programs tobeable Industry thecost ofproduction, toupgrade andstandardize skills and members/DTI technical know-how. Disseminate market developments, trade opportunities andparticipation in international furniture exhibits and trade shows,

DTI

Lock into theimplementation ofa strikeDLE moratorium inorder toenhance labor productivity.

FiscaI

High cost ofbureaucracy andred-tape Discard thedocumentation requirements oF DNR ingovernment channels intheprocessing theDepartment ofNatural Resources which ofpertinent documents increases the arenotnecessary intheprocess of costof production, securing concessions onrattanresources.

(9) Handicrafts ProductionLowproductivity because ofrising laborImprove product anddesign innovationDTI!BOI/ disputes andother related manpower given avi]able raw_terial _pplyand Industry member_ prob]eme, production constraints,


56

I_TRYSECTOR

Fiscal

BOTTLENECKS

RECOMNENOATIONS A6ENCY INVOLVEO

Political instability and national secu-lwlement astrike moratorium inthe rity concerns stir fear and appreh_ision mdium term tocounter the effects of amngforeign borrowers, strikes Gn!__Uor productivity.

OLE

The risingcostof government bureau- Encourage and promote efficiency inall cracy andred-tape, particularly in government channels, securing applications forimportation of raw mterials onconsignment basis,

Concerned goverrwnt agencies

External Heavy competition posed byThailand and Provi_ assistance forthe establishment DTI/BOI China which enjoy favorable edge over ofaproduct and market development local producers because ofincentives center. provided bytheir respective governments which translate into lower prices (I0) Mineral Products Production CB's high rsfining charges compared to Reach acompromise agreement between the Chamber ofMines other foreign gold refineries increase gold producers (through the Chamber of the cost ofproduction and operation, Hines) and the CBonimproving the recovery rates applied togold bullion. Conduct research anddevelopment studies Chamber ofHines/ onlow cost andhigh r_covery mine Bureau ofMines systems with short gestation periode and exploration ofbetter oregrades. Disseminate important geologocisl,Industry members/ technical andeconomic informaton vital Bureau ofMines tomineral investment decisions.

Fiscal

Theproducers arenot allowed bythe Enforce theselling ofallgold CB government tosell their primary gold production tothe CBbysmall-scale produce inthe freemarkst which some- miners and gold panners, times offers higher returns. Study the possibility ofareduction DFthrough the The production ofsmall-scale miners or orexemption ofgold producers from the recommndation of gold panners arebeing smuggled outof 30Z sales taximposed onmanufactured CB the country due toinadequate government articles fabricated with gold andother surveillance/menitoring oftheir precious metals. Sales toCBshould not operations, betreated asanordinary comercial transaction since gold bullions become The 30_ sales tax onmanufacturedmnetized gold forming part ofthe articles fabricated with gold and othercountry's international reserves. precious metals isanadded burden to the producers.


57

I_TRY SECTOR ...........................

BOTTLENECKS. ................

..L ........

RECOMMENDATIONS

AGENCY INVOLVEO

L--._ ........ - ..... _..................................................

--

(11) Petroleu_ Products Production Operation of hydro-power plantswas Promote anddevelop thelocalor indige- NEDA/BEU hampered bythelowwaterlevelcaused nous sources of energy to beableto probytheprolonged drought, duce them economically andefficiently. Heavy reliance Of. expdrt shipments on excess domestic consumption of petroleum products,•

External

Minimize thedependence oftheexportable BEU/Office ofthe capacity onthesurplus indomostic con- Energy Affair sumption of petroleum ,products bydevelopingindigenous orconventional sources of energy, orbyadding more valueadded inthem through further processing of petroleum products tosome hlgher-priced exportable grades,

Unstable world prices ofcrude oil,

(12) Chemicals Production:Supplyof coconut oil(the mainingre- work forthereplacement ofimported DTI/PCA/BOI dients forcoco-chemicals maybe • ingredients/materials partfcuiarIy those adversely affeceted bythedrought and thatdirectly affect theecological thetyphoons _ichhitcoconut-producing balance ofnature with coco-ch_icals. regions,

Fiscal

Lack ofproduct standardization onthe Formulate andenforce product standard-DTI/PCA, part ofgovernment particularly-for, ization measures inorder tobecompeticoco-chemicals. .. tire quality-wise intheinternational •market, Work fortheremoval oftariff rates imposed onimported rawmaterials which BOI are.procured atlesser costinthe international market,

(13) Electronics ProductionMounting labor disputes,

Implement astrike moratorium inorder DEE toenhance labor productivity. Inadequate support forthedevelopment ofhigher assemblies because oflimitedFormulate measures that will prevent/ DLE domestic market forsemi-conductor and minimize sudden orunannounced strikes other electronic devices, (such astheWelga ngBayan) which disrupt orparalyze operations, Facilitate agradual shift from simple Industry members assemblies tohigher-level assemblies,andOTII@OI


58

INDUSTRY SECTOR

- BOTTLENECKS

RECOHNE_ATIONS A6ENCY INVOLVED Develop efficiency inproduction of high Industry members qualityproducts inorder to improve thecountry's export competitiveness,

Fiscal

Inconsistency ofsome provisions with Coordinate formulation andimplementation CB/BOT regard toiwortation byforeign-owned ofappropriate policies among concerned fires contained inCBCircular 1029 and government agencies. the Omnibus Investment Code 226.

External Red,cad bullishness brought about bythe Encourage potential investors byprovi-BOl/DTl/Industry August 28coup attempt mayhave stalled ding aclimate ofpolitical andeconomic members plans ofexpansion and may_have even security and effective incentives. driven away potential investments,' Theimpact ofthe USstock mrket fall maydampen demand for1988.

Procedural The30-dey repayment scheme onO/As and Eliminate further costs asaresult of CB D/As bec(_nos overdue fors_ecompanies delayed releases ofdocuments o_.O_/DAs because oftherequiremnt that abank repayments through exemption from the could notremit without the documentsClCCO registration requirement everytime bearing theClCCO registration first, importation ismade. Theinitial registherelease ofwhich isalways delayed, tration should suffice. 14)Garments/Textiles Production Limited growth of thelocaltextile Forge astrong interface between the Industry groups industry because ofthe dependence of textile andgarment industries tobeablewith thesupervi m thegarment sector onimported raw todevelop and enhance their respective sion ofDTI. materials, which cannot beproduced capacities. efficiently bylocal producers orare unavailable inthelocal market. Optimize the utilization ofquotas in DTI/GTEB order toimprove thesupply ofgarments. High cost ofproduction. Lack oftechnology andlocal raw materials tomanufacture good quality fabrics.

External Stiff competition from new producers. Penetrate other ace-quota countries DTI initially ona 9overnment-tOmgovernnN)nt S_ggling ofquality fabrics because of basis, theinability Oflocal producers to manufacture atreasonable costs.


59

INDUSTRY SECTOR

BOTTLENECKS

RECOMMENOATIONS

AGENCY INVOLVED

.......................................................................................................................

(15)Processed Food andBeverages ProductionHigh cost ofpacking materials dueto Reduce orscrap thetariff rates appliedBOI/DTI/DF inavai]abi]ity ofgood quality materials onimported packging materials, intheIoca] market andthehigh tariff rates imposed onimported materials. Inc]ude packaging items andother CB/DTI/BOI/ necessary inputs ftheindustry inthe NEDA Higher prices ofdomestic sugar relative import liberalization scheme inorder totheworld market price, tominimize thecost ofproduction, Unreasonable cost offreight bothinthe Provide food processors andexporters DTI/SRA international andinter-island shipping, access tolower-priced sugar through the BRA's assistance, Corollary tothis, industry representatives arerequesting toSRAtoreclassify/treat sugar used as inputs toexport products asexport su9ar which ispriced lower than domestic sugar. Rationalize frei9ht rates, bothininter-DTI/MARINA national andinter-island transportation. Exempt orgive preferential rBtes on travel taxtoenable theexporter to at ]east recover promotion costs abroad,

Fiscal

Lack ofincentives forsmall exportersImprove oncustoms drawback mechanism and BOI/DF which arebeing discriminated infavor onBOItaxcredit system onimported raw of)arge corporations particularly the materia]s Forming part oftheexport multinationals, products. Dup]ication offunctions oftheBureau ofFood andDrugs andtheNFA-FTI by virtue ofthebilateral memorandum of understanding between USFDA andNFAfor testing offood products before the actualshipment,

Conso]idate under onecentral agency Bureau of theresponsibility oftesting thequality $tanderds/FDA offood exports inorder toavoid duplication offunctions among government agencies, thus minimizing cost for exporters,

Disincentive posed bythetravel taxto small andmedium-sized fires inthe promotion ofthier products abroad,

Hold re9uIar forum between food DTI/BOI processing industries, research agencies and/or other government agencies inthe development ofpolicies, plans orprograms proeotive/supportive oftheindustry rather than regulative,

Excessive fees arechar9ed bytheFTI inthetesting offood products for export relative tothose ofBFAD.


60

INDUSTRY SECTOR

BOTTLENECKS

RECQ_4ENDATIONS

AGENCY INVOLVED

FTI,being themarketing andtestingarc oftheNFA competes withprivatefood exporters intermsof market share and capebilityto attractforei9nclients. Highcostof dealin9 withthegovernment iredtape,exorbitant licensing and permitfees,graftandcorruption,

ProceduralCertain food products like ethnic foods Coordinate between concerned government DTI/BOI/CB arenotcaptured ingovernment etatls-agencies theformulation ofaneffective tics(OTI, BOI, CB)onprocessed food, monitoring andclassification system hence, theindustry's real performance fortheindustry's products. couldnotbeproperly ascertained,

Source: Inter-Agency Study Group onExternal Trade Statistics andProjections Foreign Operations Comittee Central Bank ofthe Philippines, Annual Report 1987.


61

Q

5_0!

......

3999 ?? "

78

?9

96

8i

,82 83

84

....TOT_ (?oral -exports,FOB-_Million)

85

86 87

88


_

-

,, •

z_

r,_

_I

_

_0 r'.-

:5]

'_I_ 0'_

"-"

r",,.,",_:P .P'_

I u")

_ _

r-i "_d'_ 0'_ _

_

,_1_c,,,ie-I

C_!('_")_r_ '_ _

m

e'_:_ r"-,

_r_r_-_ LO_ c_l_o_t_oo ',.O_P4c'_I*_'_,-I,-II",-,.-0,--I,--I

r-I "'-"

J_

ul

_ P'..--

_

_ O_

_

,--I

A

,,-I

-

r,,- _

A

_

_r_ r',..c'_l

,-.-10'1

_

_

_"') 0"_ r_') P"I

i',,,,,, c,_l _'_,i,_:1 _ ,.,

C_

_

,--.t

"_

_

o_ _ _ oo oo ,--I0'_ .co •

m

u"_

.,.-..

_.,_

o _.

.

.,.._

0 .,-I

u)


63

TaDle

III.2.

the

Food and Food

and

Crude Materials,

to

In 1970, more

only around

PSCC

3

Preparation

(PSCC 0), Beverage

Inedible

25 percent

of Philippine

(PSCC 3).

in 1988.

On

the

other

hand,

transactions

not

B_

of garments

exports

Percent

Another

priLnary

the

commodity

and

While the

distinct

pattern

manufactured examples, priLmary category

have accounted nonfuel had

transferred

to

developing

world demand

and

changing

which

factors tastes

for

and

consist

of

from

.05

is by

re-

(i)

fuel

exports;

(3)

by

a

including

and

the period

categories

are

the

1987.

one source

of

exports.

this shift

as lignt labor

relatively

commodities

the development Added

The

The

intensity, low

wage

has been

these

latter new

manufacturing

of synthetic to

prime

surpassing

in

wit_]

a

Labor-intensive

furniture

of

1977-

exhibited

share of the total,

nonfuel

technology.

ski 1l-intens ive

III.3b).

_igh degree

countries

and

exports.

the first time

for primary

and

in

structure

during

five

and

garments

of labor dictated

characterized

to several

III.3a

for an increasing

industries,

due

these

the perennial number

division

capital

unpredictably

along

Tables

commodities

been

percent

(commodities

commodity

and skill-intensive

defined

of

in

categories:

primary

moderately

fluctuated

(see

exports,

international

Moreover,

(4)

capital-

composition

went down

rose dramatically

following

(2) nonfuel

exports;

total exports

2),

occurred

10

which

in the export

into the

exports;

(5) highly

9

the bulk of

the change

commodities

labor-intensi ve exports;

elsewhere,

PSCC

in

in 1988.

way of analyzing

classifying

under

were (PSOC

change

in 1970 to only

and s_ni-conductors)

in 1970 to 29 percent

Tobacco

The most drastic

exports

classified

and

exports

This share consistently

which went down from 54.0 percent

1988.

1988,

than 80 percent

is

were rates.

declining substitutes the

stiff


_0 -- _

_

I

i _ •

_

_

,o

_o

o,

_

_2; MMd

d

eo

M__dd

d_M

dM_M _

_

2ddddMd

_

_

4_ _ _

_ _

MdM

"'_........;22;222

_

_ _

_

II

, !

;

!1

ii

i

e_

el

el

i!

ee

___

!!

ee

II

e_

i_

ee

ii

i_

ii

_

}!

el

ii

_,

_ _

_!

_}

_

le

.... el

!1

el

_e

,i,

ll

_

ll

el

el

__

i_

.._ .............. .....................

ii

i_

.......... _u el

_ _ ._

o ._

o


85

DISTRIBUTION

Year

MCSI-

Table III.3a PHILIPPINE MERCHANDISE (million FOB $)

FUEL

1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 '1995 1996 1997 1998 1999 2000

NFUEL

OF

.-

NFUEL

19 10. ii 50 . 42 33 .11.4" 87 42 66 97 113 143 176 128 165 214 161 167 281 253 261 320 330

2432 2408 3156 3784 3318 2649 2519 2410. 2_63 "'2091 2171 2688 2852 2990 3251 3530 3771 4234 "4662 4862 5275 5570 5874 60_0

LI. .576 824 1164 1634 2_13 2005" 1942 2195 1969 1883 2438 3113 3565 4046 4630 5294" 6159 7300" 8492 9631 10972 12561 14418 16500

EXPORTS

MCSI 59 123 158 231 244 230 310 470 365 447 620 849 1030 1187 1428 1599 1886 2336 2747 3179 3798 4385 5073 6000

HCSI 52 61 112 89. 106 95 86 105 150 243 245 311 333 396 414 441 "541 569 583 748 802 924 1015 1170

Fuel primary commodity exports Nonfuel primary commodity exports Labor-intensive exports Moderately,capitaland skill-intensive exports Highly capitaland skill-intensive exports

-1989-2000

values

are

forecasted

values


86

Table PERCENTAGE PHILIPPINE

Year

PFUEL

1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 19_8 1999 2000

FUEL NFUEL LI MCSI HCI *

0.6 0.3 0.2 0.9 0.7 0.7 2.3 1.6 0.9 1.4 1.7 1.6 1.8 2.0 1.3 1.5 1.7 i.i 1.0 1.5 1.2 i.i 1.2 i.i

III.3b

DISTRIBUTION OF MERCHANDISE EXPORTS

PNFUEL 77.5 7_.3 70.1 65.4 58.0 52.9 50.7 45.8 45.0 44.2 39.0 38.0 36.0 34.0 33.0 32.0 30.0 29.0 28.0 26.0 25.0 23.5 22.0 20.0

PLI 18.4 24.0 25.8 28.2 35.2 40.0 39.1 41.7 42.9 39.8 43.8 44.0 45.0 46.0 47.0 48.0 49.0 50._ 51.0 51.5 52.0 53.0 54.0 55.0

PMCSI

PHCSI

1.9 3.6 3.5 4.0 4.3 4.6 6.2 8.9 7.9 9.4 ii.i 12.0 13.0 13.5 14.5 14.5 15.0 16.0 16.5 17.0 18.0 18.5 19.0 20.0

1.6 1.8 2.5 1.5 1.8 1.9 1.7 2.0 3.3 5.1 4.4 4.4 4.2 4.5 4.2 4.0 4.3 3.9 3.5 4.0 3.8 3.9 3.8 3.9

-

Fuel primary commodity exports Nonfuel primary commodity exports Labor-intensive exports Moderately capitaland skill-intensive exports Highly capitaland sKill-intensive exports

-

1988 figures are 1989-2000 figures

estimated values are forecasted

while value s


67 competition

mnong

developing

countries

for markets

for

these

types

of

commodities.

Another moderately in

•category

that

capital-and-skill

1977 to ii percent

at-20

in 1987.

percent These

for primary

for MCSI exports figures

differ

puts the percentage

Tables

products only

share

and minerals)

decline

respectively

in

nonfueli with

55 percent

the rest going

was more

also declined

certain

Coconut

products

remain

by the

the bulk of these shares. (e.g., footwear,

ch_aicals,

which

of exports 12/ Bank. sugar,

products and

although

grew

suffered

although processed

and

their

to the

3.9

share

in 1987.

in On

around

manufactures

the healthy food

In

percent

from only

Non-traditional

by

forest

20.4

in 1970 to 9.8 percent

However,

ADB

and 4.2 percent

exports

20

categories.

The share went down

important

in 1987.

and

respectively.

26.2 percent

1.2 percent

from 19.7 percent

in 1970 to 73.4 percent

sectors

two

(coconut products,

the other hand, the snare of non-traditional

compose

will stabilize

used by the Central

18.5 percent,

of

that by

intensive,

to t_e other

Sugar,••forest and mineral

IH70 to only around

exports

percent

for labor

than 91.5 percent.

is

export

It is predicted

those projected

categories

frem around

in 1987.

one

III.4b, and III.4c show the composition

in 1987.

percent

8

the number

of these three categories

share of traditional • exports

23.9 percent

largest

Semiconductors,

share

rising from 2 percent

snares as 36, 46, and 14 percent,

III.4a,

the

increasing

(MCSI) exports

significantly.from

traditional/non-traditional 1970,

an

fall in this category.

2_00 the percentage

percent

experienced

intensive

the •Philippines at present, the year

has

and

growth

of

beverages

12__/ Central Bank defines traditional exports have exported at least uS $5 million in 1968.

as those

sectors

which


68 Table ll|.4a VALUE OFEXPORTS DYHAJOR COHHODITY GROUP 1970-1997 (In H/Ilion US Dollars)

-Commodity Group

I,

1970

1971

1972

1973

1974

1975

1976

1977

1978

Traditional Exports

972

1027

962

1606

2306

1767

1773

2097

1975

CoconutProducts

209

255

229

374

609

466

540

761

907

90 96 19 14

114 104 21 16

110 84 lB 16

166 153 32 23

140 381 60 28

172 230 31 33

150 299 37 54

201 412 ?O 5G

1_6 620 62 69

196

220

2t7

293

765

615

454

532

213

189 O

212. 8

211 6

275 18

737 28

59] 34

429 25

512 20

197 16

278

259

226

416

225

270

263

_2U

237 13

215 11

164 10

304 35

216 30

167 27

135 68

134 b7

145 85

20 8

24 9

34 iB

59 IB

27 19

23 9

47 tg 2

41. 20 |

72 22 4

217

218

239

439

519

332

..371

386

375

CopperConcentrates 6old Chromium Ore Others

185 -6 26

195 8 6 19

191 27 5 16

290 ]04 9 35

393 74 13 39

212 76 13 31

2_6 65 15 25

269 71 25 22

250 7b 25 24

Fruits and Vegetables

26

24

23

24

37

44

59

73

77

21. 2 3 --

20 1 2 1

l? 1 2 1

20 1 2 1 â&#x20AC;˘

31 l 3 2

35 3 3 3

47 I 5 5

56 3 5 9

60 2 5 10

AbacaFibers

15

13

13

20

38

14

IB

17

15

TobaccoUnmanufactured

14

14

17

26

30

34

29

28

29

PetroleumProducts

1T

24

19

]5

16

37

34

_7

31

Copra Coconutoil Desiccated Coconut CopraHeal/Cake Sugarand Products Centrifugal Refined Holasses Forest Products Logs Lumber Plywood VeneerSheetslCorestocks Others Hineral Products

CannedPineapple PineappleJuice Pineapple Concentrates Others

292


69

Conodity group

],

1979

[980

1981

1982

198_

19B4

1985

1986

19B7

Traditional Exports

2561

3068

2742

2116

2068

1828

1302

1275

1_67

CoconutProducts

1024

811

750

590

680

727

459

470

56J

Copra Coconutoi] Desiccated Coconut Copra Nea]/Cake

" 89 742 107 86

47 ••567 116 81

_4 533 102 81

49 401 68 72

4 516 88 72

.... 5BO .106 41

347 76 36

18 33_• 44 75

_2 _Bl 75 73

Sugarand Products

239

.657

604

441

316

279

185

103

71

212 27

624 33.

566 38

416 25

299 17

.246 33,

169 16

B7 16

bO 11

490

425

352

294

33[

271

199

201

24_

144 198 107 35 6.

. q2 .181 111 36 5

?6 126 ill 31 8

79 124 67 20 4

74 149 76 28 4

88 107 56 14 6

39 91 51 12 6

27 104 56 9 5

0 154 _8 15 6

'.918

757

532

440

266

243

267

224

429 215 25 B8

312 169 15 36

249 154 10 27

115 104 J9 2B

84 100 12 47

90. 140 11 26

109 91 7 17

128

107

133

J_b

137

J50

Centrifugal Refined Molasses Forest Products Logs Lumber ely,ood VeneerSheetslCorestocks Others .. Hinero] Products

609

CopperConcentrates gold Chromium Ore Others

440 10_ 23 42

_45 2_9 .33 101

•" Fruits andVegetables

100

111

74 _ 10. 1]

82 6 9 '.14

89 6 7 19

8B 9 10 21

74 .4 ? 20

97 5 13 28

89 7 14 26

8_ 6 18 30

86 6 20 38

CannedPineapple PineappleJuice Pineapple Concentrates Others

121

AbacaFibers

.25

27

21

20

19

30

17

1]

12

TobaccoUnmanufactured

33

29

4B.

47

34

29

24

21

IB

PetroleumProducts

42

89

64

142

_

_9

6_

88.

.90


70

Commodity 6roup

1970

1971

1972

1973

1974

1975

.1976

1977

197B

B5

I00

119

269

407

504

749

1024

1422

72

74

77

212

328

367

546

711

1045

Elec. & Elec, Eqpt,/Parts & Telecom. Gareents Textile Yarns/Fabrics Foot.ear Travel Goodsand Handbags MoodManufactures Furnitures andFixtures Chemicals CopperMetal Hon_Metallic Mineral Manufactures

---1 6 7 1 1 1 I 11 7 I I 5 6 ?................. 3 10

2 2 9 1 2 B 2 6

11 5fl 24 2 5 24 3 I0

27 94 20 4 8 35 6 15

47 100 22 ,3 1+0 29 5 21

B5 185 39 5, 4 32 10 27

124 250 34 10 b 2B 22 51

253 327 44 32 9 30 27 59

S

25

37

33

28

38

4_

Machineryand Transport Eqpt. ProcessedFoodand _everages Misc.Manufactured _rticles, n.e,c. Others

l B 5 _0

2 , 9 4 25

3 11 10 13

3 15 20 12

6 17 23 36

10 14 4b 27

16. 20 65 30

26 31 60 _1

37 41 Bl 62

13

26

42

57

79

137

203

313'

377

3_

'59

55 104 B4 4 34 57 14 25

II. Non-Tradition_ Products -Non-Traditional Manufactures

Non-Traditional Unmanufactures Nickel Iron Ore AggLomerates Bananas Mangoes Coffeet Rawnot Roasted Fishp Fresh or 8imply Preserved Rice Others

.......... .............. 5 1 .......... 2 .............. 5

TOTAL EXPORTS

7& 3 25 26

8

15

II-

14

I

9

9

21

2B

1&

&

8

4

2

3

2

24

14

22

1136

1106

1886

2725

2294

2574

3151

3425

._6 1

24 1

28 1

45 2

5

11

20

4

6

1

5

1062

Ill. SpecialTransactions

IV. Re-Exports

17

73 2 2 16

77 57 73 2 45 41 4 14


71

Commodity Group II. Non-Traditional Products Non-Traditional.Manufactures Elec. & Elec. Eqpt./Parts & Telecom. Garments Textile Yarns/Fabrics Footwear TravelGoodsandHandbags WoodManufactures Furnitures andFixtures Chemicals CopperMetal Non-Metallic Mineral Manufactures Machineryand Transport Eqpt. ProcessedFoodand Beverages Misc.Manufactured Articles, n.e.c, Others Non-Traditional Unmanufactures Nickel Iron Ore Agglomerates Bananas Mangoes Coffee, Rawnot Roasted Fish, Freshor Simply Preserved Rice Others

• liT.

Special Transactions

IV. Re-Exports

TOTAL EXPORTS

80URCE:Dept. of EconomicResearch, Central Bankof the Phil.

:

1979

1980

1981

1982

1983

1984

1985

1986

1987

2000

2650

2920

2851

2846

3430

3275

3447

4197

1474

2005

2374

2376

2387

2992

2765

2879

3642

412 405 55 51 8 40 55 112

671 502 74 67 .9 35 77 89

838 618 69 73 I0 46 87 105

1000 541: 56 62 I0 41 72 95

1053 545 44 55 8 53 84 86

1329 603 38 46 6 50 88 105

1056 623 39 39 I0 43 84 150

919 751 44 31 12 49 89 243

1119 1098 68 31 16 62 130 245

60

48

40

26 26

111 21

168 24

172 18

162 " 22

47 46 I18 94

47 92 149 133

47 154 155 124

48 150 143 118•

35 1_7 133 112

36 109 137 313

30 106 136 257

45 116 159 231

78 126 199 286

526

645

546

475

459

438

510

568

555

92 120 97

138 118 114

103 116 124

49 106 146

53 114 105

12 105 122

64 95 113

15 85 1_0

76 191

5 44 87 46 35

7 45 107 73 43

6 39 90 24 44

8 49 71 -46

9 47 77 g 45

7 76 69 .... 47

7 70 99 62

8 119 143 :68

12 32 207 25 82

11

33

50

45

57

8

12

8

7

29

37

10

9

34

125

40

112

149

4601

5788

5722

5005

5391

4629

4842

5720

........ 31.

5021


72

Table I11.4b 6ROHTH RATEOFPHILIPPINE EXPORTS (In %) 1970-1987

Commodity Group

I.

1971

1972

1973

1974

1975

1976

1977

1970

1979

Traditional Exports

5.66

-4.38

63.54

43.59

-23.37

0.34

16,27

-5.82

29,67

CoconutProducts

22.01

-10.59

64.04

62.83

-23,4B

15.88

40.93

19.19

12.90

42.50 8.33 10.53 14.29

-3.51 -[9.23 -14.29 0,00

50.91 82.14 77.78 43.75

-15.66 22.86 -12,79 149.02 -39.63 30.00 87.50 -48;33 19.35 21.74 17,B6 63.64

_4,00 37.79 143.24 7.41

-32.34 50.49 -8,89 18.97

-34.56 19,68 30.49 24.64

12.24

-1._6

35.02

]61.09

12.77 0.00

-0.47 -25.00

30.33 200.00

-6,B3 -12.74

84.07

-29.81

-22.95

-23.72 85.37 -9.09 250.00 41.67 73,53 100.00 0.00

-2B.95 -14.29 -54.24 5.56

-22.69 -10.00 -14.91 -57.69

19.49

-36.03

Copra Coconutoil DesiccatedCoconut CopraHeallCake Sugarand Products Centrifugal Refined Molasses Forest Products Logs Lumber Plywood VeneerSheetslCorestocks Others Hineral Products CopperConcentrates 6old Chromium Ore Others Fruits andVegetables CannedPineapple PineappleJuice PineappleConcentrates Others AbacaFibers TobaccoUnmanufactured PetroleumProducts

-9.28 -15.38 20.00 12.50

0.46

'9,63

63,26

-19,61

-26.18

17,16

-59,96

12.21

166.00 -21.17 55.56 21.43

-26.16 -26.47

19._5 -20,00

-61.52 -20.00

7.61 6B,75

20.00

-2.59

24.71

49,$9

-19.16 -0.74 151,85 -1.47 104.35 -12.77 12%00 11.11 -50.00

9.21 26,97 75._1 I0.00 300.00

-0.69 132.94 48.61 59.09 50.00

-2.85

62.13

-6.72 7.04 0.00 9.09

76.00 35.53 -8.00 75.00

5.48

29.67

11,75

4.04

0.00

3.24 51,B3 35.52 -46,06 25.47 0.75 237.50 295.19 -29.B5 2.70 -14.47 9.23 0.00 -16.67 80,00 44.44 0.00 15.39 66.67 -26.92 -15.79 11B,75 11.43 -20.51 -19.35 -12.00 -7.69

-4.17

4.35

54.17

-4.7_ -50,00 -33.33

-5.00 0.00 0.00 0.00

5.26 55,00 12.90 34.29 19.15 7.14 23.33 0.00 0,00 200.00 -66.67 200.00 -33.33 50.00 0.00 50.00 0.00 66.67 0,00 0.00 lO0.O0 0.00 100.00 50,00 66.67 00.00 II.II 30.00

-13.33

0.00

53.85

0.00

21.43

52.94

41.19

-20.O_

-21.05

90.00

L0.92

31,B2

25.96

-63.16

29.57

-5.56

-11.76

66,67

15.38

13.33

-17.65

0,00

3.57

13.79

6.67

131.25

-O.ll

8.92

-16.22

35.49


•73 Table lll.4b

(cont'd) Commodity 6roup

l,

nVER_EFORTHEPERIO0 1980

1981

1982

1983

1984

Traditional Exports

19,60

-10.63

-22.8._

-2.27

CoconutProducts

-20.80

-7.92

-21.33

15.25

-47.19 -2_.98 8.41 -5.61

-27.66 -6.00 -12.07 0.00

44.12 -24.77 -$3,33 -11.11

-91.84 28.68 29.41 0.00

12,40 20.45 -43.06

174.90

-8.07

-26.99

-26.34

194.34 22.22

-9,29 -26.50 19o15 -34.21

Copra Coconutoil DesiccatedCoconut CopraNeat/Cake Sugar andProducts Centrifugal Refined Iqolasse_

-11.61

1989

-2.07

7,22

14,81

-2.73

6o91 -36_86

2.40

19,35

24.52

_-1,05

-40.17 -28,30 -12,20

-4.03 -42.11 108,33

77.79 14.41 70.49 -2.67

16.90 35.49 $9,40 24.10

2.7L 3.45 7.71

-11.71

-33.69

-44.32

-31.07

25,49

-5.71

-28.13 -32.00

-17.7_ 94.12

-31.30 -51.52

-48.92 0,00

-3L.03 -$1.29

26.09 29.35

-5.21 3.13

1.01

20.90

4.16

1.70

-13.27

-17.18

-15.46

12,54

-18.13

-26,57

Logs Lumber Plywood VeneerSheet_lCorestocks 6thers

-3&.11 -8.59 3.74 2.86 -15.67

-17.39 -_0.39 0,00 -13.89 60.00

3.99 -1,99 -39.64 -_5.48 -50.00

-6.33 20.16 13.43 40.00 0.00

18.92 -28.19 -26.32 -90.00 50.00

-55.68 -14.95 -8,93 -14.29 0.00

90.99

-17.54

-29.72

-17,29

-39,95

-8,65

CopperConcentrates 6old Chromium Ore (]ther_

23.86 132,04 43.48 140.40

-21,28 -10.04 -24.24 -12.87

-27.27 -21.40 -40.00 -99.09

-20,19 -8.88 -_3.33 -25,00

-53.82 -32,47 90.00 3.70

•Fruits and Veqetables

11,00

9,01

5.79

-16,ql

10.81 100,00 -10.00 7.59

9.54 0.00 -22.22 35.71

8.00

TobaccoUnmanufactured PetroleumProducts

CannedPineapple PineappleJuice PineappleConcentrate_ Others AbacaFibers

1967 1_70-77 1978-87

-28.77

Forest Products

Hinera] Products

1986

-30.77 -100,00 14,29 48,06 ?.80 21.4_ -25,00 66.67 -16.67 20.00

-2,74 -21,59 50.23 15,86 22o53 9.77 28.04 4,90 -50,00 _9.57

9.88

-16.10

13.09

-0.87

-26.96 -S.85 -36.84 67.85

7.14 40.00 -8.33 -44.58

21.11 -$5,00 -$6.36 -$4.62

i0.11 81,88 27.12 5.09

-2,81 10.30 -5.36 L1.99

24.30

2.26

0.74

9.49

17.61

8,15

-1.12 _15,91 50.00 -55,56 42,R6 -10.00 10,53 -4.76

17.57 25.00 44.44 49.00

2.30 40.00 7.59 -7,14

-6.74 -14.29 28.57 15.39

3.61 0.00 11.11 26,57

16.59 40.49 11.90 49.44

4._5 16.18 19.25 16.52

-22.22

-4.76

-10.00

55.67

-43._3

-23.53

-7.69

12.91

1.80

-12.12

65.52

-2.08

-27,66

-14.71

-17.24

-12.50

-14,29

12.21

-1.77

114.29

-l,ll

-28.09

121.fib

-34,51

-58.06

51,54

39.6fl

19,70

23,49


74 Table I|I,4b

(cont'd)., Commodity Group

I|.

Non-Traditional Products Non-Traditional Nanufactures Elec,& Elec. Eqpt.tParts & Telec_. Garments Textile YarnsFabrics Foot,ear Travel GoodsandHandbags MoodNanufactures Furnitures andFixtures Chemicals

1972

1973

1974

1975

17.65

19.00

126.05

51.30

2_.83

2.78

4.05

175.32

54.72 145.45 62.07 616,67 100.00 60,00 45.83 100.00 50,00

450.00 100,00 2800.00 16,67 28,57 166.67 _,00 0.00 100.00 _.,_ 100,,00 150.00 -36.36 14.29 200.00 0.00 I00,00 50.00 20.00 0.00 66.67

1976_

1977

1978

1979

48.61

36.72

_8.87

40.65

11.B9

49,77

30,22

46.9B

41.05

74.07 6.38 10,00 -25,00 25:00 -17.14 -16.67 40.00

80.85 85.00 77.27 65.67 -60.00 10.34 100.00 2B.57

45.88 104,01 62.85 35.14 30.90 23.B5 -12.82 29.41 25.00 100.00 220.00 59,3B 50,00 50,00 -11.11 -12,50 7.14 33,33 120.00 22.73 103.70 8_.B9 15.69 89.B3

CopperMetal Non-Metallic Mineral Manufactures

233.3_

-20._0

212,50

48,00

-10.81

-15.15

_5,71

13.16

-27.91

Rachinery and Transport Eqpt. ProcessedFoodandReveraqes flisc, flanufacturedArticles, n.e.c. Others

100,00 12.50 -20.00 -16.67

50,00 0.00 22.22 36.36 150.00 100.00 -4B.O0 -7.69

100.00 13.33 15.00 200,00

66.67 -17.55 100.00 -25.00

60.00 42.B6 41.30 11.11

62'.50 55.00 -7.6_ 3.33

42,_1 32.26 ,35.00 lO0.O0

27.03 12,20 45.68 51.61

38.b0

73,42

48.18

54.19

20.45

39.52

78.7,9

30.51

33.33

-42.86

-62.50

B3._3

-33.33 1100.00 -41.62

57_14:

31.82

Non-Traditiond Uneanufactures Nickel IronOreAgglomerates Bananas Mangoes Coffee, Rawnot Roasted Fish, Fresh or Siaply Preserved Rice Others â&#x20AC;˘

III.

,

1971

100.00

220.00 0,00

TOTALEXPORTS

50.00 0.00

150,00

120.00

-20.00

50.00

Special Transactions

IV. Re-Exports

61.54

60.00

6.97

35.71

-2B.57 67.27 82.46 15.38 16.67 60.71 '62.22 4.11 -3.95 I).07 15.4B 0,00 I00.00 0.00 50.00 -l).33 i00.00 25.00 .1150.00 BO.O0 -24.44 29.41 81.82 -15.00 -5.99 62.50 57.89 39.02 52.63 250.00 228.57 33.33 87.50 -26.67 27.27 0.00 78.57 40.00

0.00

_00.00

0.00

-50.00

-50.00

50.00

-2.64

70.52

133.33

44.49 -ID,B2

12,21

22.42

8.70

)4.34


75 Table llIo4b (cont°d)

MERA6EFORTHEPERIOD

........................................................................................................

_

Conodity Group ...........................................

If.

1980 ..._.i

.......

1981 -_- ........

1982 :1983 _-_ ...........

1985

19Bb

1982 1970-77 1978-87

......................................

Non-Traditional Products

32,50

10.19'

-2.36

':;-0.1B

20.52

-4o52

5.25

21.76

46.17

16.27

Non-Traditional Hanufactures

_6.02

18.40

0,08

0.46

25.35

-7.59

4.12

26,50

46.82

1%14

EleC._ E]eC. Eqpt.IPar_sl Teleco_, 62.8_ _24.89 19._3 Garments 23.95 ,23.11 -12.46 Textile Yarns/Fabrics _4.55 -6,76 -18,84 Footwear : _1.37 8.96 -15.07 Travel Goodsand Handbags 12.50 11.11 0.00 Moo_Manufactuce_ -12.50 31.43 -10.87 Fureitures andFixtures 40,00- 12.99 -17,24 Chelicals -20,54: IT.DR -9.52 CopperBeta] _ Non-Beta]]ic Bineral Manufactures _3.55_'_I-20.00 -16.67 Bachineryand Tr_mSportEqpt, 0.00 0.00 2.13 ProcessedFoodand_everage_ 100.00: 67._ -2.60 _isc. BanufacturedArticles, n.e.c. 26,27 4.03 -7.74 Others 41.47 -6.77 -4.84 Non-Traditional Unsanufactures Nickel : Iron Ore Agglomerates •Bananas _angnes ....Coffee, Ra. not Roasted Fish_ Fresh or Sieply Preserved Rice Others

Ill.

1984 _--------_-_

..........................

Special Transactions

IV. Re-Exports

TOTAL EXPORTS

SOURCE:Dept. of Economic Research, Central Bankof the Phi],

5.30 26.2! -20.54 -12.fY 21.76 0.74 10,64 3,32 :20,55 46,21 -21o4_ -13,64 2.63 12,82 54,55 -11.29 -16.36 -15.22 _-_g.5I 0.00 -20.00 -25.00 66.67 20.00 33.3_ 29.27 -5,66 -14.00 I3;95 26.53 16,67 4.76 -4.55 5._5: 46,_ -9.47 22,09 42.86 62.00: _e_82 326,92 51.35 2.3B.... 5._B1 -35.00 -19.23 t4.2_ -2_;0_: 22:22 -27.08 2,B6 -16,67 50.00 7_._ -15.33 -14.17 +2._ _ ?.4_ 8,'62 -6.99 3.01 -0.7I: 16.91 25,16_ -5.09 177.46 -17.89 -10,12 23.81

22.62

-15.35

-13.00

-_.37

50,00 -1.67 17.53

-25.38 -1.69 8.77

-52.4_ -B.62 17.74

_,16 7.55 -2D,08

40.00 -14.29 2.2_. -13.3_ 22.99 -15.89 58,70 -67.12 22.86 2._3

33.33 25.64 -21.11

-4.58

16.44

-77._b_:_,_|_ -7.89 -9.52 16.19 _-_._8

11,_7

7,1B

-76,_ fftO0,O0 , p4,65 -• -10.53 -10.59 _5,0_, ,6.92 _8,54

19o85

0.00 -7.89 43,48

4.55

-2.17

4.44

31.91

26.67

-B5.%

50.00

277,7B 267.65

:69.00

180.00

-14.1_

4.60

200.00

51.52

-10.00

27,59

-72.97

-10,00

25.80

-1.14

-12.25

-0.32

7.71

69.0B 62.74 _.5_" M;09: 16.73

29.37 17.07 9.83 24.1_ 13.75 9°B6 23.11 21,17 %,71 -0,06 15.39 19.50 14.06 35.17

58,8W

12.50 -22.22 -4.OR 61.70 B,45 -10o39

-2.29

159.25 5'14.76 38.53 4_.91 4_.43 _9.21 :i_ 6_.76 _0_

14.29 5_.00 70,00 _3.11 44.44 44.76 _.6B

-33.33

6.34

16.67 615.00 64.45

2_.86 6.62 20.84

21.63

21.28

153.97

20.72

33.0_

147.86

72.40

18.13

19.73

7°14

20.59

-12.50


7B

T.ble I I.4c STRUCTURE

OF PHILIPPINE (In _percent)

EXPORTS

1970 .......... A. COMMODITY I.

"................... GROUPS

Traditional

- :

Exports

91.53

:oconut Products Sugar and Products Forest Products Mineral Products Fruits and Vegetables _baca Fibers Tobacco t_nma_ufactured Petroleum Products II.

53.01

19.68 14.01 18i.46 ii.35 26!.18 7.34 20.43 15.86 2.,.45 .... _ 1..92 1.41 0.47 1.32 0.50 1.6_ 1:.55

1985 â&#x20AC;˘ ,''

1987 . ,_-.-..,----

28.13 9.92_ 4,_00 4.30 5.25 2.9.4 0_37 _,52 0...84

23.,90 ,9.,81 1.24 4.25 3.92 2.62 0..21 0.31 1.54

Non-traditional

Products

8.M0

45.78

70.75

Non-Traditional Non-Traditional

Manufactures Usmanufaeture_

6.78 I..22

34.64 11.14

59.73 11.02

0.0_ _

0.57

0.26

0..12

0.47

0.64

@.86

2.60

100.00

100. _0

100.00

100.00

7.50

16.60

21.40

18.50

8.70

16.70

13.60

L8.50

41.50

27.20

35.70

34.60

39.60

26.50

18.90

17.20

2.70

13.00

10.40

11.20

100._0

i_0.00

100.00

100.%0

III.

Special

IV.

Transactions

Re-Exports

TOTAL

B.

1980

73.37 63.67 9...70

MARKETS ADB

Developing

European United

Member

Economic States

Others

TOTAL

of

basic

Community

of America

Japan

Source

Countries

data:

(EEC)

Dept. of Economic Research, Central Bank of the Phils.


77

and

furnitures

percent

for

the

manufactured Garments total

fixtures which

period

export

and

is

in

grew by an average

1978 to 1987)is still

electronics

exports

manufactures 9.7

and

in

has also been substantive

percen_ _ in

1987.

Bananas,

in

the

Raw Coffee

and

a_our_

and

15

electronics.

39

share iof

from around

than

non-traditional

garments

already makeup

19871, i.Theincrease

more

worth: noting_

concentrated

together,

of

percent

non-traditional

1.2 percent

in 1970

FreSh

Fish,

of

or

to

Simply

/ â&#x20AC;˘

Prepared,

are

among

%

it/lemore

important

non-traditional

unmanufactured

exports.

If and

define

tradi%ional

non-traditional

changes of

we

in

exports

exports

the compositio_

of

as manufactured

values.

exports

was

trade

as

has

with

is

percent percent member

countries

particularly

of F_C rose from 8.7 percent ADB 18.5

developing percent

III.6b and

in

are

Hongkong,

South

rose from

(Table III.6c).

in

the

namely

traditional exports

Tne

The growth

of

share

the US and

in 1987

in

Japan

in 1970 to

34.6

in 1970 to 17.2

Korea and ASEAN.

around

was

direction

by EEC and ADB

in 1970 to 18.5 percent

their

and others.

41.5 percent

up mostly

slight

definition

of

fell fram 39.6 percent

was taken

goods

forecasting

III.6c).

partners

fell from around

imm%ber countries in 1987

re-exports

not as marked,

trading

that for Japan

The slack

there

the share of non-traditional

although

by traditional

in 1987 while

PriL_ary

in 1987 the share

the rest falling under

The US share

in 1987.

will be used

shows that

(see Tables III.6a,

exports

declined.

exports

while

some change,

well

Philippine

III.5

33.6 percent

63.7 percent,

There

TaDle

goods,

to

exportsalongtheselines. Th_

traditional/non-trad/itional

future

to be equivalent

developing The

w_ile

share that of

7.5 percent

in 1970

to

in Philippine

exports

to


7B

Table I_II.5 PERCENTAGE DISTRIBUTION OF TOTAL TRADITIONAL/NON-TRADITIONAL (1971 '- 1987)

Year

1971 _

Non-Trad_tioqal

6.5i _

Traditional

EXPORTS,

Others

92_69

0.79

92.59 _8.18 87.5.2 83_.0_ 76.77 76.48 68.67

0.45 0_58 0.44 I_00 2.02 0.95 0.82

19_ 1973 1974 1975 1976 1977 1978

6._6_ ft:2_ _ 12.04. 16.00 _ 21.21 22.56 30.51

1979 1980 1981 1982 1983 198_ 1985 i_86

32,04 3_4_'64 41.49 _.32 47.69 55._0 59.73 59.46

67,_9 6'4_i5 57.46 51.60 50..49 42_0_3 ' 39.14 38.'06

0.87 1.21 1.05 i. Z8 1.82 _2.47 1.12 2_48

1987

63.67

33.60

2.73


_

...... -

8

m

•,_

_,_

_

__

_.el"

e'---

_:,

_.,_

_

-..

..............

_:_

_

_._

__

_

_

_

,----

_

_

o'_

,,.-.- ,_--..

_

_,._

_

:..

n---- _--

..

_

_-.-

_

_'-_

0_-_

_

_

_

1.1_

_,_

_-_

_

o

u---

_t_

,u_

_

_._

_,_

t_'_

_

,._-

....

_c,

!_.1

._

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-_

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81

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82 ADB developing worth

member

noting.

more

Philippine

than double

growth

rate of 75 percent

away

especially

Table

stagnant

A comparison,

proportion

manufactures,

4_ percent

1975 to 1980.

ASEAN, have

and

percent

for

unlike

compared

the world

the trend

in

198b

and chemical.

to and

to

73

the

t_e

world

percent

for

The

most

1987.

The share

exports

to

in Philippine

to 29 percent

for Philippine

products,

than it exported manufactures

noted

shows.• the

of non-traditional

to DMCs

thus

The composition

however,

This share• grew

•growth was in electronics

of garments

to the world

(see

III.7a).

With exports export 1981-85 growing ASE_N

exports.

a greater

the

r_ains

(DMC_), especially

in that there was a

during

phenominal

annual

1965-1975

pattern

to DMCs was around

62

grew at an average

for the period

The snare of non-traditional

period

The

follow •the general

non-traditional

and

respectively

1975-1988.

partners.

exports

DMCS

the period

rate

trading

exporting

rest of the world.

during

annual

Philippine

from traditional

P_ilippines

to DMCs grew at an average

countries

important

trend of exports

shift

is especially

III.6b).

member

become

in particular

for ASEAN, which

and 23 percent

ADB developing

and

exports

spectacular

(see Table

increasingly

(DMC) and ASEAN

that of world exports

rate was most

1975-1988

countries

respect

to ASEAN,•coconut

(in contrast

with the declining

grew at an enormous before by around

products

failing

pace during during

32 percent.

trend

destination

is given

exports

It picked

of garments,

in Table

classified

III.Tc.

the

for the world).

in the recent years nave also been encouraging

The value of Philippine

among

1975-8H, modestly

1985-1986.

Exports

are

according

high-growth Electronics

during

up

textile

again

the period in

1987,

and footwear

(see Table

to

III.7b).

to coranodity groups

by


83

Table III.7a .._ERAGE PERCBT_IiE-DISTRIBUTION OF EXPORT PRODUCTS TOTOTAL EXPORTS Exports toAsean, DMCs andWorld (In %)

â&#x20AC;˘Commodity Group .....................

_.._

.................................................................................................

I, Traditions]Exports Coconut Products 223,1

Copra Coconut oil 057.72 Desiccated Coconut 081_3700 Copra Meal/Cake

7.25 13.2325,12

1,94

4.59 15,80 2,15

3,74 12,37 2,55

3.05 9.76

0,00 1,88 0.05 0.00

0,16 4,06 0,37 0,00

0,06 3.41 0,28 0,00

1,68 0,85 0.03 0,00

1,44 1.41 0.20 0,00

12,04 6.96

0,00

0,79 1,68

20.16 15,51 14,91 8,26 11,15 6,47 0,00 0,75 0,83 0,00 0,88 0.49 0,00

0,00 0.00 0.00

0,30 1,42 0,50 0,26

Forest Products

t.03

7,70 8.04

0.33

4.09 5.59

0.10

2,29 4,20

Logs Lumber P1)rwood Veneer Sheets/Corestocks Others

0,14 0,60 0,00 0.29 0.00

4,20 0.49 2.62 0.27 0.13

0,00 0.23 0,08 0.02 0.00

1,62 0.44 1.84 0.06 0.12

1.37 2.32 1.39 0.40 0,11

0,00 0.07 0.03 0.00' 0.00

0,20 0.34 1.64 0.02 0.10

0.06 14,86 15,47 0,05

8,64 8.56

0,10

2,79 4,72

0,00 0,00 D.05 0,01

I0,52 9,37 3:92 3.90 0,15 0.67 0,27 t.63

0.00 0,00 0,05 0.00

5,76 2,80 0.17 0.41

0.00 1,721,88 0.00 0,752,24 0,03 0,17 0,17 0.07 0,16 0.42

0,21

0,39

1,92

0,23

0,64 2.44

0,81

0.92 2,73

0.01 0.01 0.00 0.20

0,20 0.02 0,00 0,16

1.45 0,II 0,15 0,21

0,01 0,01 0.00 0,21

0.30 0,02 0.00 0,32

1,66 0,12 0.21 0,45

0,00 0,02 0,00 0,79

0,20 1,61 0,030,11 0,00 0.36 0,70 0.64

II,26 0,00 0,29 10,96

5.54 0,25 0,17 5,12

2,86 0,51 0,78 1,57

2.32 0,02 0,08 2,22

2,59 0,I0 0,27 2.21

2,76 0,41 0,70 1.65

3,69 0.00 0,09 3.60

3,39 2.03 O,Ol 0,24 0,12 0.37 3,19 1,42

Centrifugal Refined 06115200 Molasses

Mineral Products 287,1102 Copper Concentrates Cold 287,9101 Chromium Ore Others FruitsandVegetables 058,9908 Canned Pineapple 058,5400 Pineapple Juice 058,5705 Pineapple Concentrates Others

265,5 121

34.66 49.34 59.82 13,35 31.75 38.68

0.33 9.17 1.70 1,17

Sugar andProducts

247 248 634.2

1975-1980 : 1981-1985 : 1986-1987 ASEAN DMCS WORLD ASEAN DMCS WORLD ASEAN DMCS WORLD

OTHERS Abaca Fibers Tobacco Unmanufactured Petroleum Products

2,71 9.86 1.82 1,41

0,00 2.09 0.05 0.00

20.16 16,26 15,74 8,27

3.20 2.57 1.66 0.54 0.06

4,53 2,86 0,31 0,87

0,47 6.77 1,11 1.41

0,28 2.42 1.17 0.22 0.10


84 : Commdity Group

11, Non-Traditional Products

65 85 83 82 5 682,1205 66

89

1975-1980 : 1981-1985 : 1986-1987 ASEANDMCSk_ORLD ASEANDNCSWORLD ASEANDMCSWORLD

60,02 47.09 39.02 82,76 65,23 59,81 83.60 79,8672.28

Non-Traditional Manufactures

47,63 39,65 29.35 77.43 59.59 50,35 75,68 72,5961,57

Elec.Eqpt,/Parts &Telecom. Garments TextileYarns/Fabrics Foobear TravelGoods andHandbags Wood Manufactures Furnitures andFixtures Chemicals Copper Metal Non-14etallic Min,Manuf, Machinery andTransport Eqpt, Processed Food andBeverages Hisc.Manuf, Articles,n,e,c. Others

24,23 15.22 8,88 61,36 36,09 20.61 1,57 1.90 7.45 0,54 1.50 11,42 1,43 3,32 1,19 0.57 1,52 0,95 0,06 0,27 0,87 0,05 0,40 1,06 0.02 0,02 0,24 0,01 â&#x20AC;˘ 0.01 0,17 0,22 0,11 0,79 0,11 0,12 0,91 O,N 0.10 1,01 0,07 0.20 1,62 3,79 2,99 1,36 3,19 3,65 2.13 0,00 0,01 0.00 0,00 0,00 1,24 5,60 5,32 1,15 2,29 2,35 0,61 2;02 1,90 0.71 1,79 1,27 0,76 1,24 1,53 1,31 1,74 1,83 2.51 1,32 1,07 2,41 0,86 0,86 2,74 6,07 5,89 1,98 4,85 9,80 3.62

Non-Traditions1 Unmanufactures 12.39 7,43 9,68

5.32

5,64 9,46

7,91

7,28 10.72

0,07 0.00 0.00 0.08 0.79 2,17 9.11 0,16

0.38 0,00 0,19 0,83 0,33 1,00 3,97 0,94

2,12 1,46 2,31 0,11 0.58 1,52 0.90 0.67

0.03 0.00 0.04 0,22 2.69 0.41 1.38 0.55

0.15 0.01 1.22 0,56 1,32 0.57 0.58 1,24

1,09 2.08 2,38 0,15 1,10 1,59 0.12 0.96

0,00 0,00 0.10 0.18 4,36 0.53 2,43 0.32

0,13 0.00 0,92 0,37 1,89 0,82 1,08 2.08

III, SpecialTransactions

3.90

2.31 0,67

2.05

1.53 0,66

0,38

0.26 0.14

IV, Re-Exports

1.42

1,27 0.48

1,84

1.50 0.84

8.76

6.64 2,48

931.2805 057,3100 057,9703 071.11 042.2102

Nickel IronOreA991owates Bananas Man9oos Coffee,Raw notRoasted Fish,Fresh orSimply Preserved Rice OLhers

55,62 32,7319,27 0,51 1.79 17.35 0,52 1,40 1.05 0,07 0.19 0,59 0,01 0,01 0.26 0,09 0,13 1.05 0,12 0,26 2,06 9,96 12.87 4.65 0.00 0,00 3,19 0.29 0,85 0.38 1,29 1,05 1.15 1.12 1.47 2.30 0,99 0,75 3.38 5,09 13,10 4.89

TOTAL EXPORTS

0,15 1.54 2,40 0.19 1.51 3,29 0,22 1.42

100,00 100.00100,00 100.00 100.00100,00 100.00 100,00 100.00


85

Table III,7b AVERAGE G_OWTH RATE OFPHILIPPINE EXPORTS TOOHCSANOWORLD EXPQ_TS •{In_)

Commodity Group

I, Traditions]Exports

155.44 82.17 14.73 -23.35 -18,61 -15,22 79,91 -3,00

CoconutProducts

3036,33 40,41

223,1

Copra Coconut oil 057.72 Desiccated Coconut 081,3700 Copra Heal/Cake Sugar endProducts

061.5200

CentrifugalRefined Molasses

287,1102 287,9101

058.9908 058.5400 058,5705

285.5 12I

14.8!

80,28

0,83

-7,88 235,42 47,73

-8,71 234,98 31,49 -5.04

7,22

47.17 55,25 19,36

23,87 _14,53 53,30 58,23 -35,08 21,26 32.67 25,93 63.85 98,02 77.78 42,20 29,30 8.7,33 4.88 -5,97 74,60 -4.12 -9,93 i9,80 29.76 14,41 31.34 54.84 7,78 -1.38 -4,77-16.07 -9,62 0.02 19.74 0.66 70.45 0.00 29.09-20,00-22,8S:13,27 0.00 -33,33 31,16 -2,67 1,37 -23.96 -9.69 -21,76 -57,91

10.45 -36,36 -33.68 !04.47 -31.07

0,00 1048,61 1.48 -23.44 -9,46 -22,59 -33.33 405,25 -36,95 0,00 57,50 -0.59 19,80 13,66 -1,69 -33.33 -18.19 -27,59

1282,54-31.03 0,57 -31,25

103.46 10,05 IT,7E-35,61-14,38-13.I5 -7,65 -2,08 -I.50 37.33 46,80 20.90

•Logs Lumber Plywood Veneer $heets/Corestocks Others MineralProducts

0,00 0.00 43,92 0,00

0,00 701,56

Forest Products 247 248 634,2

• 1976-1980 1991-1985 1985-1987 1986-1987 ASEAN OtiCS WORLDASEAN OMCS WORLD ABEAN I)MC5 WORLD ASEAN OMCS WORLD

;

-20,00 -9,83 -8,98 0.00 -7,86 -11,3! 0,00 -69.57 -62,15 -100,00-100,00 19321,31 4T4,77114,07-32,03 -7.21 -10,99-18.25 1!,4__15,60-16,83 45,22 48,08 -20.00 151.30 76,52 -20,46 -17,20 -12.29 226,28 30.28 7,43 790,87 105,73 21,43 O.O0 0,00 70,00 -20.03 -21.48 -14.73 -32.35 595,11 9.13 -53,48 1931,88 66,67 0,00 0,00 0,00 -20,00 42,40 12,00-65,41 55.38 1,11-100,00-65.91 20,00 205,72 116.36 35.30 86,60 -25,62 -22,55 01,81 -17.22 -4,96

Copper Concentrates Gold Chromium Ore Others

0.00 0,_0 0,00 -15.25

Fruits andVegetables

-2.04

Canned Pineapple Pineapple Juice Pineapple Concentrates Others OTHE_ AbacaFibers Tobacco Unmanufactured Petro]eum Products

117,71 110.8_. 479,05 93,43

31,42 0.00 -29,T4 42.89 0,00 -20,98 30,77 _,34 ;5,49 45,!@1375.46 82,67

56.61 30.45 !30,86 20,!0

16.20 -T6,37 -16.10

-29,90 0,00 -!3,07 0,43 -]5,33 0,00 -10,85 0.38 -8,88 0.69 -I0.06 -27,18 -100,00 :5,08 2532.42 -40,90 -3,81 146,72 4.99

30,55 10,64

4,16

-8.95 21,11 -20,89 -35,00 -75,61 "-38,36 -20,01 -34,62

65.72 21,48

9,49

-5,04 147,6626.85 93.74 15.38 2,27 110,08 -15,27 -0,_8325,63 -19,79 3,61 !3,00 27,26 20,00 15.52 8,17 11.89 3,36 20,6I 8,57 -14.89 28.84 0.00 0,00 0,00 40,00 0.00 424,92 12,55 0,00 708,20 15,79 11.11 -2,43 22.2t 73.33 295.90 28,97 14,87 33,82 25,70 11,64 67.22 36,11 26,67 0,00 0 O0 O, O0 2_,79 3,7,05 14.35 -25,72 __o8,33-5,96 297,98 77.16 -1,49 983.62 129,88 21,65 =70,00 ;7,30 18.57 40,00 --2,70 -2,73 -33,33 16,14 -24.85 -10,71 -7,69 -4,63-I0.21 -2.94 -8,46233.02 0.77 16,36 73,06-14.68-34.46 2,97 -14.29 30.62 42.70 29.55 -27,16 -25.54 0.02 351,36 89,36 14.39!148.00 143,33 39.68


86 T

â&#x20AC;˘

Commodity Group If,Non-Traditional Products Non-Traditional Manufactures

1975-1980 ASEA_DMCS _I.D

1981-1985 1985-1987 1986-1987 ASEANDMCS WORLDASEANDMCS WORLDASEANOMCS WORLB

89.00107,4585,1619,1413.76 4.73 0.85 5.08 7,50 34,20 17.8421.76 65.2892,$889.2624,6016.43 7,34 1,49

5.04 7,68 38.28 19.1826.50

Elec, ZElec, Eqpt,/Parts &Tel. _2q.882009,07 285,5332,8423,42!1.04-3,25 0.32 -3,9231.6934.1021.76 C_rmnts 4,54 31.37 80.40 -15,49 -5.39 5,07 3229 39,90 23,36 104.68 -1.34 46.21 65 TextileYarns/Fabrics 4.95 105,35 47.27 172,571537,78-11,51 341,402645.07 23,33 25.32 82.03 54,55 85 Footwear -T.24 134.01426.67 39,05 =1.00 -9.80 27.65 -2.70 -11,91 63.33 -1.16 0.00 83 TravelGoods andHandbags -9,34 21.97 -2,00 30.39 -4,44 6.56 114.31174.34 40.00 152,71 7.39 33,33 Wood Manufactures -11,35 43,45 4,I4 72,08 60,02 5.03 -14,40 21,13 8,83 -79,56 -3,96 25.53 82 Furnitures andFixtures _0,25 68,13 288.00 61,54 2I,!2 2,53 29,95 9,08 15,82 9.98 35,44 46.07 5 Chemicals 6.85 14,6964.7647,0937.5912,79100.8583,7235,2364,9116.35 0.82 682.1205Copper Metal 0.00-20.00D,OO 0.00 0.00 75,65 0,00 0.00 15,97 -5,81 66 Non-Meta]]ic Mineral Manufactures -0.8822,38 18.36*20.95 -;4,8645,92-39,29-28.273,84-20.24 -21.2322,22 Machinery andTransport Eqpt, 0,!8 53,2074,00 7.92-II.76-7,7512,I329.2435,56-64.7653,12 73.33 Processed Food andBeverages 137,35115,59111,43 5,79 1.41 6,51 -0,28 5,23 5,10 1.91 13.71 8,82 89 Misc.Manufactured Articles,n, !71,56 160.51 _,78 -8.14 -10,75 -1.69 !1,21 10,13 13.78-17,42 12.11 25,16 Others 46.03 58,84 78,52 11.47 71.05 28,98 29.00 2.73 -1,40 111.30 -0.38 23.81 Non-Traditional Unmnufactures922.24331.1674,16 1,90 -4.59-3,97 5,42 8.76 8.51 15,81 5.26 -2,29 Nickel 0.00 0,00 63,64289,10 643.2157,27 0.00 6.92 85,59 -lO0.O0 -lO0.O0 IronOreAgglomerates G,O; 0,00 C,OO Q.00 -16.11 -4,04 0,00 -60,19 -10,21 -10,59 Bananas 0,00 122,46 1t,23 50,06 135,7_ 1,45 -0.52 -6,88 0,25 -14.99 -39.33 -8.92 Mangoes 3533,88 40,99 50,00 23,!9 -2,11 !,87 16,95 24,0I 21,43 100,49118,86 80.00 Coffee,Raw notRoasted _8.87 34,15 430,00 94,83 92.7_ 12,4! -21,68 -16.74 -3,87 -76.26 -78.43 -73,11 Fish,Fresh or Simply Preserved O,O0 0.00 113,75 41,82 18,38 0,91 100,22 68.22 44.23 -12.85 52,50 44.76 842,2102Rice 0,00 79681,76 0,00-48,90 0.00 Others !23.16 102,57 58,18 73,07 11.53 8,21 10,07 22,87 20.73 7.42 16,48 20,59 931,2905 057,3100 057.9703 071.11

IIhSpecial Transactions

IV.Re-Exports TOTAL EXPORTS

326,21204,1291,43-12.56!0.07 8.44 18.8540.84 1,39 33,72-0.60-12.50

G,O0 _.00 _0,00 12!,_6 _2,50 ?_,_9 68,34 8!.30 48,35 52,79 33,63 33,04 !!3._9 9E,50 30.4E 9,37

!.59

-4.03

4.20

4,07

2,87 44.20 22.37 18,13


87

Table llI,Tc _ITIONALANDNDN-_AI)ITIONAL EXRJRTS TODEVEL_I_ NEMBER COUNTRIES ANDNORLD EXPQITS {)975-1987) (In MillionU.S,$)

ComexJity Group

[, Traditional Exports

18

92

1,767

137

O

13

466

8

39

8ti

1

12

489

13

39

561

0 0 0 0

1 11 I 0

172 230 31 33

0 B 0 0

I 35 3 0

47 567 118 81

0 1 0 0

0 9 2 O

O 347 76 36

9 4 0 0

20 17 2 0

32 381 75 73

0

5

615

88

181

657

0

65

185

0

11

71

0 0

3 2

581 34

88 0

174 7

624 33

0 0

59 6

169 16

0 0

6 5

60 11

1

35

225

4

53

425

0

23

199

0

29

243

1 0 0 0 0

32 0 3 0 0

167 27 23 8

0 3 0 1 0

16 5 27 3 I

92 TaT 111 36 5

0 0 0 8 O

8 3 10 0 2

39 91 51 12 6

0 0 0 0 O

0 4 23 1 0

0 154 68 15 6

0

22

332

0

t48

918

0

29

243

0

25

224

Copper Concentrates Gold Chromium Ore Others

0 0 0 O

15 6 0 0

212 76 13 31

0 0 0 0

105 39 2 3

545 239 33 101

0 0 0 0

16 8 2 3

84 100 12 47

0 0 0 0

77 7 1 1

109 91 T 17

Fruits andVegetabTes

0

1

44

0

3

111

2

7

136

¢

10

150

Canned Pineapple Pineapple Juice Pineapple Concentrates Others

0 0 0 0

0 0 0 1

35 3 3 3

0 0 0 0

2 0 0 I

82 6 9 14

0 0 0 2

3 0 0 4

89 7 14 26

0 0 0 4

2 0 0 8

gg 6 20 38

OTHE_ Abaca Fibers Tobacco Unmanufactured Petro]eum ProUucts

I4 0 1 14

16 i 1 14

85 14 34 37

35 0 1 34

47 2 I 44

146 27 29 90

5 0 0 5

8 I 0 7

80 17 24 39

33 0 0 33

50 1 1 48

lt8 12 18 68

Coconut Products 223.l 057.72 001.3700

Copra Coconut oil Desiccated Coconut Copra Heal/Cake SugarandProducts

061.5200

CentrifugalRefined Holasses

ForestProducts 247 248 834.2

Logs Lumber Plywood Veneer Sheets/coresLocks Others NineralProdocCs

287,1102 287,9101

058.9908 058,5400 058,5705

265.5 121

: 1975 : 1980 : 1985 : 1987 : * ASEANDNCS WORLD ASEAN OMCS WORLD ASEAN DNCS WORLO AGEAN DMCS WORLD

471 3,068

9

144 1,302

51

166 1,367


88

Commodity Group

: 1975 : 1980 : 1985 : 1987 : _ ASEAN ONCS WORLD ASEANDHCB WORLD ASEANDHCS WORLD ASEANDNCSWORLD t

41

73

504

223

465 2,650

510

825 3,275

408

893 4,197

Non-Traditiona] Hanufactures

40

68

367

169

385 2,005

487

770 2,785

372

817 3,642

Elec.Eqpt./Parts &Telecol. Garments 65 TextileYarns/Fabrics 85 Foot_ar 83 TravelGoods andHandbags Wood Manufactures 82 Furnitures andFixtures 5 Chemicals 882.1205 Copper Metal 66 Non-Netallic Min.Nanuf, Machinery andTransport Eqpt. Processed Food andBeverages 89 Nisc._nuf.Articles,n.e.c, Others

1 4 3 0 0 1 0 7 0 13 4 I 1 6

2 6 5 0 0 1 0 13 0 19 5 2 1 14

47 100 22 3 10 29 5 21 0 33 10 14 46 27

106 3 3 0 0 0 0 10 0 12 4 5 5 20.

172 16 33 3 0 0 I 22 0 41 17 15 11 54

671 502 74 67 t 35 77 89 0 60 47 92 149 133

410 I X 0 0 • I I 32 0 2 3 5 3 29

470 t,056 8 623 11 39 2 39 0 10 I 43 2 84 67 150 0 168 16 26 6 30 13 I06 6 136 188 257

269 3 2 0 0 0 1 54 0 I 3 5 4 31

390 1,119 18 1,098 18 88 2 31 0 16 I 62 3 130 143 245 0 162 8 22 13 78 16 128. 8 199 195 286

1

5

137

53

80

645

23

55

5t0

36

77

555

0 0 0 0 I 0 0 0

O 0 2 I 0 0 2

33 0 73 2 2 16 0 11

0 0 0 0 2 9 40 I

4 0 2 5 3 11 45 9

138 118 114 7 45 107 73 43

0 0 0 I 17 3 0 2

1 0 9 4 17 9 0 16

64 95 113 7 70 99 0 62

0 0 O 1 6 2 25 I

0 0 7 5 6 10 25 23

0 76 121 12 32 207 25 82

[II, Spocial Transactions

I

2

21

16

24

33

2

3

12

I

3

7

IV. Re-Exports

0

2

6

15

37

10

17

40

48

79

149

381

975

Non-Traditional Un_nufactures Nickel IronOreAgglomerates Bananas Mangoes Coffee, Raw notRoasted Fish,Fresh orpreserved 042.2102 Rice Others 931.2905 057.3100 057.9703 071.11

TOTAL EXPORTS

• t Fi9ures does notsum uptotaldueto roundin9

57

167 2,294

5,788

II. Non-Traditional Products

530l

989 4,629

506 1,140 5,720


89 It

is

countries 2800

will

(see

increase, year

TaDles

2000.

U.S.,

t_at

the share

On

slightly,

the other hand

the share

from 34.5 percent

of economic

the

capitalist

countries.

This will result mainly

various

is also worth

attempts

and

traditional

EEC

in the case of

the

The

of exports,

moderately

skill-intensive)

and non-traditional.

;

trade

reason

would

trade then

will

of

becane

exports

rise from 11.3 percent

from increased

values

(2) the five aggregated

fuel, labor intensive,

of

trade with

the

to the outside

to

to 14

socialist

world.

for Pre- and

to forecast merchandise

forecasted

classifications

and

States

that the share

will

the end in view of determining The

the

for EEC countries.

noting

Forecasts of Exports and Demand Post-Shipment Financin 9

categories;

capital-

to 27 percent

as the latter open up their economies

requirements.

will

in

United

!ntra-regional

percent.

with

Japan

in

these four categories

2000

year

forces that will see the rise of protectionism

outside

section

to

the

the

countries

This

in

member

be

It

B.

developing

in 1987 to 22 percent

of the direction

Lnore prevalent.

countries

to

exports

of the

to 12 percent

in the pattern

realignment Western

Similarly,

from 17.2 percent

and from 18.5 percent shift

exports

in 1987 to 25 percent

III.8a and III.8b).

will decline,

this

of

rise frcm 18-.5 percent

though

countries

for

predicted

from

pre- and post-shipment

will

then

namely:

be

1989

disaggregated

(primary fuel,

along

(3) by country

of

PSCC

prilmary

and skill-intensive, destination;

to

financing

(i) the ten single digit

categories capital-

exports

and

non-

highly and

(4)


90

TaDle I_I.8a DISTRIBUTION OF PHILIPPINE EXPORTS BY DESTINATION (1987 - 2_00)

PERCENTAGE

Year

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Developing Member

European Economic

Countries

Community

18.54 18.96 19.46 19.97 20.47 ...... 20.97 21.48 21.98 22.48 22.98 23.49 23.99 24.50 25.00

United States

18.53 17.46 17.00 16.55 16.09 15.64 15.18 14.73 14.27 13.82 13.36 12.91 12.45 12.00

34.55 34.00 33.42 32.83 32.25 31.67 31.08 30.50 29.92 29.33 28.75 28.17 27.58 27.00

MERCHANDISE

Japan

Others

17.16 19.85 20.03 20.21 20.39 20.57 20.74 20.92 21.10 21.28 21.46 21.64 21.82 22._0

11.22 9.73 10.08 10.44 10.80 11.15 11.51 11.86 12.22 12.58 12.93 13.29 13.64 14.00

Table III.8b DISTRIBUTION OF PHILIPPINE MERCHANDISE EXPORTS BY DESTINATION (1987 - 2000)

Year

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Developing Member

European Economic

Countries

Community

1032.86 1341.23 1541.82 1756.36 2016.3_ 2312.99 27_0.04 3209.08 3742.92 4297.26 4956.39 56_5.63 6541.5_ 7500.00

i_32.31 1235.12 1346.91 1455.57 1584.87 1725.09 1908.13 2150.58 2375.96 25_4.34 2_i_.96 3059.67 3324.i5 3600._0

United States

1924.7_ 2405.16 2647.87 2887.40 3176.63 3493.20 3906.76 4453.00 4981.68 5484.71 6_66.25 6676.29 7363.86 81_0.00

Japan

955.98 14_4.19 1586.98 1777.47 2008.42 2268.87 26_7.02 3054.32 3513.15 3979.36 4528._b 5128.68 5825.94 66_0.00

Others

625.0662 688.3002 111.79 128.52 148.93 172.16 202.58 242.42 284.85 329.34 381.95 440.96 509.8b 588.00


91

In

order

disaggregated

to

forecast

total

into its various

exports,

components

the

dollar

equivalent

was

thus:

x$ --x - P/E X where is

X

is

the

the implicit

peso

equivalent

of

peso price deflator,

exports

and E

at

constant

is the implicit

prices,

P

exchange

rate

X applying

to

exports.

A

log-linear

variables

using

data

compounded

growth

rates were obtained:

for

P

and 3.1 percent

covering

model

for

E . X

was

the period

fitted

1967-87

6.7 percent

to

and for

these the

X,

three

following

12.5 percent

Since

X$=X+P-E X the compounded

growth

rate for dollar

exports

should De approximately

16.1

percent.

Ad3ustments there

were

is an impending

rate of real exports 1988). an

economic is placed

This was combined

inflation

for dollar

The From

made when making

of 8 percent

slowdown

projections. in the world

at 7 percent

For

example,

economy,

(from a growth

the

since growth

of 21 percent

wit_ a rate of peso depreciation

of 3 percent

with a net result of 12 percent

growth

in

in and 1989

exports.

forecasts

of merchandise

exports

a level of $8B in 1989, exports

The export

projections

presented

by

are presented

are expected

in

to reach

Table $30B

up to the year

the Central

2000.

1994 are lower than similar forecasts 13__/ Bank of the Philippines. The forecasts are

13/ A similar

in

III.9.

methodology

was applied

by the Central

Bank.


82

H_ |

â&#x20AC;˘

_

I

r_

*rt

â&#x20AC;˘ F"4

_

_

4J

_-

O_

_

.

I

I

I

i

I

i

I

i

t

i

I

i

I

I

i

I

I

I

i

I

I

I

I ____

!

____

I

____

,-.4 _

_i _i _,}._

L_ _P C"-

_

._

_

I ,_


93

compared

in

introduced economy

Table in

consolidates that

order

which

Recessionary

I•II.10.

to account

in

turn would

forces

would

expansion

relatively constant

growth

growth

be present

Hopefully,

from these trade.

rates

financing

in The

incorporates

financing

former

is quite difficult

officially

from

negligible)

and

data are

exports

are covered

to

supported

trend

coverage

interviewed

past

finally

reflected

1993-95.

was applied

to in

•After

the

this,

(9

a

a

percent •

required

of total

ADB

on terms

of

and

it

exports

components.

on the percentage of exports

the

It

of exports•• which

are

are not •readily available

and

are self-financed.

an educated

of credit.

by post-shipment

in the

and percentage

post-shipment

by letters

based

and imported

behavior

financing

At present

about

The remaining

financing. • It is

rise to 10 percent

is then adjusted

(which

guess had to be made

arise from this need.

will gradually

of financing

is

presented

Data on these variables

available,

demand would

percentage

EBC

leading

were calculated

for both domestic

insurance

on

credit

be

requirements•

to estaDlish

financed.

no

trade.

for E ).

is equal• to 14 percent

needs

most of the exporters

As

U.S.

world

the

disappear

12.•5 percent

the sample •c_nputations

reference.

under guarantee

•on

the

X

Pre-snipment used

in

was

this time the uncertainty

This prospect

X, •and 3 percent

forecasts

slowdown

when

events would

of exports

our

impact

after

figures

in

up to 1992

rate of approximately

for P, 6.5 percent for

bias

nave a significant

in • world

nigh

downward

for the impending

its contain market.

would • have resulted

renewed

The

on

surely how

much

95 percent

amount

estimated

by the year 2000.

by ass_ning

is

is

of

assumed

that

this

The• amount

a 90-day turnover

rate.


Table III.10 COMPARISON OF CENTRAL BANK AND PIDS FORECASTS, 1989-1994

Year

1989 1990 1991 1992 1993 1994

Sources:

PIDS

Forecast

7923 8795 9850 11030 1257_ 14600

CB

7980 9015 10725 11930 13415 15230

Table III.7 of this study, and Inter-Agency Study Group on External Trade Statistics and Projections of the Foreign Operations Committee, Central Bank of the Philippines, Annual Report 1987


95 The forecasted in

Tables

III.lla

financing

from $50M

for post-shipment,

value)

III.12.

III.12a,

II_12b,

Tables requirements

a

III.lla will

that

growth

the

in 1989 to $4.2B

requira_ents

will

increase

and

primary

III.12c

in

and

financing

percentage

Tables

III.ll

requirements

of classification:

show

exports

requirements

SUPPORT

across

are

the ten

exports

are

(see

l-

Tables

of Philippine

role coming

easier

financing

This is

an

indication

long term

and

is

based

cheaper to

in nature

to

on

the

finance.

distribute

the

of maturities.

SECTOR

support exports. export

is provided

from the private

of

This

the spectrum

by which a fledgling

mentary

exports,

bulk

it is not possible

institutional

share of this support

the

will be relatively

FOR THE EXPORT

tantial

that

rate is involved).

of lack of data,

direction

"infrastructure"

two modes

requirements

a large extent, and

(both

and III.12d).

turnover

INSTITUTIONAL

To

from $1.1B

III.3 and III.4

come from manufactured

because

total financing

â&#x20AC;˘â&#x20AC;˘

are shown

pre-shipment,

and traditional/non-traditional

III.12c

shorter

assumption

IV.

For

and post-shipment

but only along

that much of the credit

However,

requirements

for total exports

in Tables

Pre-shipment

PSCC categories

(i.e.,

to increase

the financing

forecasts

are shown

disaggregated

digit

respectively.

are expected

disaggregated

and

also

III.llb,

financing

in 1989 to $750M in 2000.

The

through

and

requirements

in 2000, while

terms

pre- and post,shipment

plays It

a vital

provides

the

sector can thrive.

by the government

sector.

role

with a

for

the

necessary A

subssupple-


96

I

I,.,4

11_

.,-n.

C 0 ,---,"4

01_4J

_

0"_ I'_ _-I ¢'_ _--I _ .

t"- 0'_ kO O00_ .

.

_._

,':_ ,_ _0 I"" _I "r_ r"l CI_ ¢_

r-4 _

_

_

,--I _I _'_I

I_" gO ,_ _

_,--'I

_f_.Ot""

Mdu_r2dd,_dd_M

4dMd_d_d_r_g_dd


_

I

_ m_

M

.?

O

_

I

___

_____

_ __-__ _____

•_

"

.

____ ____

___

_ _

4d_g_M_ddM

__

__

,

97


98

Table llI.llc PERCENt'AGE DISTRIBUTION OF PHILIPPINE MERCHANDISE 1 - DIGIT PSCCCATEGORY (1987-2000)

EXPORTS

BY

,_,

Year

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

0

1

15.94 0.50 14.94 0.45 14.45 0.43 13.95 0.41 13.44 _.39 12.96 0.37 12.46 0.35 11.97 0.32 11.48'0.30 10.98 0.28 10.48 0.26 10.00 0.24 9.50 0.22 9.00 0.20

2

3

4

5

6

7

8

9

9.60 10.02 9.67 9.33 9.00 8.67 8.33 8.00 7.67 7.33 7.00 6.67 6.33 6.00

1.74 2.16 2.06 1.97 1.87 1.77 1.68 1.58 1.48 1.39 1.29 1.19 1.10 1.00

7.13 6.81 5.75 5.50 5.25 5.00 4.75 4.50 4.25 4.00 3.75 3.50 3.25 3.00

4.40 3.63 3.48 3.32 3.17 3.02 2.87 2.72 2.56 2.41 2.26 2.10 1.95 1.80

8.42 10.14 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00

9.93 9.81 10.16 10.51 10.86 11.21 11.55 11.90 12.25 12.60 12.95 13.30 13.65 .14.00

13.61 13.49 13.87 14.24 14.62 15.00 15.37 15.74 16.12 16.50 16.87 17.25 17.62 18.00

28.74 29.34 29.98 30.62 31.25 31.89 32.53 33.17 33.81 34.45 35.08 35.72 36.36 37.00


_I

_

• _

M

N

_._

N

I

I

_

_ _

_

_

_

_ _

_

_

_

_ _

_

_

_

__ __

d_d_dg_2dgddd

I

_

__d_4_Mdd_dd

_____

_

I •

l I

_

_

_

_

_

_

_ _

_

_

_

_ _

_

_

99


Tamle III.12a PERCENTAGE DISTRIBUTION OF PHILIPPINE MERCHANDISE EXPORTS CLASSIFIED AS TRADITIONAL/NON-TRADITIONAL (1987 - 2000)

Year

Traditional

1987 19_8 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2_0

33.6 32.5 31.5 3_.5 29.4 28.4 27.3 26.3 25.2 24.2 23.1 22.1 21._ 2_.0

DISTRIBUTION CLASSIFIED

Year

1987 19_8 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 199_ 200_

OF AS

63.7 64.6 65.4 66.3 67.2 68._ 68.9 69.8 70.7 71.5 72.4 73.3 74.1 75.0

Table III.12b PHILIPPINE MERCHANDISE TRADITIONAL/NON-TRADITIONAL (1987 - 2000)

Traditional

1871.9 2299.1 2495.7 2682.5 2_95.9 3132.5 3431.6 3839.8 4195.8 4525.4 4874.1 5i37.7 5607.0 6_0.0

Non-Traditional

Non-Traditional

3548.7 4569.8 5181.6 5831.1 6619.2 7500.4 866_.7 i_19_o8 11771.6 13370.5 15276.4 17372.1 19784.7 225_0._

Others

2.7 2.9 3.1 3.2 3.4 3.6 3.8 3.9 4.1 4.3 4.5 4.6 4.9 5.0

EXPORTS

Others

150.4 205.1 245.6 2_1.4 334.9 397.1 477.7 569.4 682.7 804.1 949..5 1098.2 1308.3 15_0.0


101

PRE-SHIPMENT

•Table III.12c FINANCING REQUIREMENTS

CLASSIFIED

AS

TRADITIONAL/NON-TRADITIONAL (1989 - 2000) (Current $ Million)

Year

Traditional

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

349.3 375.5 405.4 438.5 48_.5 537.6 587.4 633.6 682.4 733.3 785.0 840.0

POST-SHIPMENT

Year

1989 199_ 1991 1992 1993 1994 1995 1996 1997 1998 1999 •• 2000

Non-Traditional

""

725.3 816.2 926.7 1049.9 1212.6 1426.7 1648.0 1871,9 2138.7 2432.1 2769.9 3150.0

Table III.12d FINANCING REQUIREMENTS TRADITIONAL/NON-TRADITIONAL (1989 - 20_) •(Current $ Million)

Traditional

Others

CLASSIFIED

Non-Traditional

15.8 16.8 21.8 31.2 42.9 57.6

32.7 36.5 49.7 74.8 108.2 152.9

73_3 84.9 103.5 117.8 133.1 15_.0

205.7 251.0 324.4 39_.7 469.8 562.5

34.4 39.4 46.9 55.6 66.9 79.7 95.6 112.6 132.9 152.6 183.2 210.0

AS

Others

1•.6 1.8 2.5 4.0 6.0 5.0 11.9 15.1 20.2 24.5 31.1 37.5


102 The support is

first section

to â&#x20AC;˘enhance local exports

presented.

organizations

A.

The latter focuses toward

section

development

program

the

existence

Philippineâ&#x20AC;˘

an

share

of the

objective of

concensus

Philippine

products

identification

to assess

in

a

foreign which

and

time,

concern

the

is

export

is to look

development

attempt

to

that

assess

an

through

of the

there

Secondly,

markets.

of foreign demand the country's

meeting the

such other

It

must

increasing there

the

is

a

institution

hand,

of its production,

skills

Dealing

includes

development training,

Promotions

and

in

product encompasses

product

the

terms

the

marketing

to

former

of in

to the

their

products'

development, the

concepts

the

in order

to engage

enhance

local

the need

with

products

resources To

of first

and second,

advantage,

and other demand.

viability involves

for particular

comparative

Product

manag_nent.

of enhancing

are marketable,

and marketing.

production

towards

and competitiveness.

in

knowhow

exporter

existing

primary

and foremost

process

production

promotions

the

in foreign markets.

of local raw materials

on

The

same

First

availability

marketability,

review

can best be achieved

is

their marketability

able

major

program.

of products

is to nave knowledge

by

initiative

Progr_a

policy

the

products

development

exportable

to

coordinated

that this objective

Export

be

government.

at

goverr_lent

sector

meet - that is the need to achieve

of an export development

enhance

the

system.

to

Development

attempt

and

the private

of

of exports.

an

of a

exports

effectiveness be

of

an overview

on the role played

the develo_nent

is

provides

afterwhicn

The Goverl_nent's Export

This

into

of this chapter

and

technical

and

design,

involve

selling


I03 t_rough share

the of

exposure

the

penetration,

Given

and promotions

market,

such

as

such as negotiations

this background,

of the product,

negotiations

for

for lower tariff

this chapter

negotiations

proceeds

quotas,

for

and

a

market

and non-tariff

barriers.

by asking

following

the

questions:

(a)

What

is the present

development

support

- the agencies

given by the government

involved,

the policies

for

export

and programs

of

action? (b)

How amply covered

(c)

How

effective

accessibility

1.0

The Present

and

trade,

Export

is mainly

country' s

organizational

ensure

Develo_nent

(DTI).

ITG a

in terms

of export of

development?

implementation

and

structure

government's

export

formulation,

(2) program

its wings

with

government

formulation These

development,

for business

its

implementing

the International

program

of ten agencies

to the Department

office

as one of

the formulation

of the Department

program.

is assigned

the exports

development

is composed

comprehensive

exporters

expands

concerned

export

Program

As the primary

As such it has under

(ITG) which

The

the program

Philippine

the Deparhnent

strategies.

the

is

aspects

to its intended beneficiaries?

The task to develop of Trade and Industry

are the various

Trade

Group

and implementation

(see

Annex

B

for

of the

of Trade and Industry).

which

are

and a focused agencies

brought

together

implementation

are involved

(3) monitoring,

in

(i)

of

to the

policy

(4) regulation,

and


104 (5) service agencies

(a)

delivery

pertinent

and their mandate

to international

are described

Philippine

Trade Training

Center

The

is responsible

for

PTTC

Filipino offers

exporters

through

three major

exhibition

The

first aims

international

This

includes

research

and market

financing

Product

the knowledge training

and

skills

program.

(2) product

on

preserved

foods.

The

testing;

of

agency and

(3)

Cottage

Product

Standards

Exhibition

of

manageaent,

the

Food

Institute Industry

has

exporters

in

their

costing

products.

and

pricing,

techniques

in

market

materials

and

finished

involves

This

the

government

linkages

(FI'RI), Forest Technology

Center

quality

personnel

Products

and

fresh

other

specialized

(FDC),

Philippine

Research

(CITC), and the

and

Institute Bureau

of

exhibition

for

testing.

use of

products,

as

well

as

of

the

to trade fairs.

involved in

Center

presenting

in participation

is

with

the effective

includes

Center

raw

furnitures

Development

(BPS) for product

managanent

of

textiles,

Center

training

addition,

of marketing

production,

testing

and

The

products. and

aspect

efficient

includes

as

(FPRI),

planning

on

the

of local

penetration.

Research

promoting

on

garments

such

the competitiveness

and financial

testing

products

agencies

to develop

knowledge

of

skills

upgrading

(i) training;

market

sources

In

(PTTC)

training.

the

Textile

These

below:

a comprehensive

services:

trade and commerce.

in

the field of

the

upgrading

international

market


I05

researcn,

market

of export

training

information

dissemination,

and planning

ated

:

Budget

Department

and

studies

facilitation, and

Considered offers and a

consultancy

financing one-stop

An

export

prlmary

can

in

promoting

conducts

strategies.

private•

in

and •promotion,

under (i)

the

export

(3) market

assistance

procedures,

and Would-be

register

and •

under

ex/x_rters.. It

also

and an export assistance

his

product

with

Registry

of Philippine

and promotions

DTI,

it

doc_m_entation, marketing,

•the

program.

•international sub-contracting

operates unit.

agency

•Exporters

Likewise, between

which

it

is

foreignbuyers

and producers.

studies

on • product

profile

The agency for

is involved

on export

doctm_entation center

its • marketing

international-market

measures

agency

exporters

agency

revlew and coordination.

services ••on export

and local manufacturers

It

The agency

an internationally-distributed

•part • of

engaged

for

exporter

circulates •as

_the

and information

(2) marketing

(4)•policy

88

(BETP)

assistance

of Trade and IndUs£ry.

assistance product

is an export

[m21M

:

Export Trade Promotion

The • BETP

1986

:

Personnel Complement

Bureau of

management

and seminars.

Year

(b)

and

appropriate

and foreign-trade

and

is also

and

formulate

raw

materials

country

and

involved

in identifying

export-import

procedures.

missions

and •conducts

sourcing,

product and

export

recommending

It

industry-sector

monitors dialogues


108

with

local

exporter

coordination

efforts.

organizations

Center

It Basically, trade

Budget

:

P26.7M

:

150

Center

main

The regional

foreign

assistance

of

buyers

and

assistance

and

countries

exporters

also

in the planning

and

(CITEM)

%mder

the

DTI.

participation

in

as a way of

exposing

updated

and developments

exhibition

and trade

the products

Budget

:

P47.5M

:

150

of garments

Export Board

ob3ective

Lastly, The

and

it

latter accurate

fairs

locally

on

a

(GTEB)

is to oversee

and textiles.

involved

of exporters.

1987

Complement

of

of new products.

:

primary

It is also

services.

Year operated

and Textiles

organization

producers/manufacturers.

specialized,

conducts

and

and exhibits.

and consultancy

basis as a way of exposing

GTEB's exports

in

about new products,

Garments

arm

organization

in trade fairs

Personnel

(d)

and Missions

and promotions

the

and

provides

matching

Center

Expositions

policy-review

products.

Filipino

information

is

here

merchandising

provides

Trade

marketing

participating

on-site

provides

Complement

activity

export

exporters in

the

exhibitions

The

its

1987

its

Philippine

of

:

for International

is

part

Year operated

Personnel

(c)

as

the overall

This agency

is given

administration the task to

of issue


107

quota

allocation

textiles.

and export authorizations

It issues

other raw materials

It

licences

international

data,

such as prices

trends

in garments,

and other developments

Foreign

This in

the

1979

Budget

:

@57M

:

268

Trade Service

formulation

specific

selling

strategy.

markets.

As

the

in

scheduling

and marketing

and specific

such,

of product-market

makes

participate.

commercial

of market

It

also

foreign

buyers

This

in the

industry,

to garments.

involves

agency

is

as an

input

identification

that have also

potential

involved

which on-site

visit

of trade

enables promotional

to the country

and

missions.

Year Operated

:

1986

Budget

:

@II9M

:

80

Personnel

industry/market

information

products

to organizers

countries conducts

warehouse.

in

of in the

strategies.

representations

foreign

and

(FTSC)

investors

FTSC fairs

Corps

areas,

implementation

pertaining

:

agency gathers

investment

developments

Year operated

Complement

on

and

materials

garments

information

up-to-date

of garm_its

of textile

of a bonded

exporters

and demand,

Personnel

(e)

for the importation

and in the operation

provides

on the exports

Complement

exhibitions

the â&#x20AC;˘

country

activities servicing

such

and to as

incoming


108. (f)

Bureau

This trade

of International

agency

relations

such,

it

is

the

is responsible

for

especially

matters

involved

negotiations

and

(GSP,

assume

in

or

and

This

government-wide

Philippine

assistance

:

91

and

country's on

the

provides

to provide

as

provides for

assuring major proper

adequate,

a clearinghouse

assistance

lower

adequate ports.

It

of

reliable

and

economic

on

shipping

information

to exporters

surcharges,

and

shippers

rates of

conducts on

also provides

to

freight supply

techniques

assistance

Shippercon various

(Shippercon)

and services.

negotiating in

and

to

on trade negotiations.

P4.7M

tasked

for

agencies

:

services

The agency by

other

Budget

is

schemes

allocation

1979

Shippers Council

is

barriers,

trading

:

Complement

trade

tackles

Year Operated

Shippercon shipping

with

As

for

non-tarlff

for quota

coordination

foreign

access.

it

preferential

of positions

to

to market

issues

and

negotiating

requires

pertaining

and strategies

primary

tariff

in

consistency

Personnel

(g)

positions

in the different

ASEAT-PTA),

products.

of

matters pertaining

The

reduction

(BITR)

all

formulating

of local products

GSTP,

specific

on

consultations.

elimination

inclusion

Trade Relations

one's

information

terms

exporters products,

of all types

products.

booking

to

export

a training program

regarding

shipping

for various

containers

shipping

exporters

especially

for

in

the

exporters

In addition,

it

and chartering.

on basic

and conditions.

freight It

also

rates, gives


109

assistance

to

exporters

in

computing

freight

co_ts

and

in securing

insurance.

•The agency in the regions

have field offices

outside

by the DTI Regional

Offices

Manila

:

=

1982

Budget

:

PI.2M

:

18

International

Coffee

Complement

Organization-Certifying

Agency

•This agency• is•responsib! e for• the administration exports -

and represents

an organization

develo p

•and

Specifically,

of coffee

promote it

the country

buyers and producers.

•coffee

exports

to

quota

required

to exporters,

provides

by ICO, andprovides

The

agency

production, opportunities

•the clearance

also provides

quota and export

information

guidelines.

and world prices

of coffee

and

to

countries.

monitors ••quota

of the coffee's

origin

as

for •coffee exports.

to exporters Similarly,

is provided

pertaining

information

on

by the agency.

1981

Budget

:

@4.3M

:

21

Complement

task is

." ..

Year operated

Personnel

coffee

Organization

non-quota

assigns

certification

Coffee

Its primary

and

•accredits coffee exporters,

(IC/)-CA)

of Philippine

in the International

_

allocations

and are represented

Year operated

•Personnel

(h)

Metro

coffee market


110

(i)

Product

This through

Development

agency

contributes

product • quality

research

and

assistance charge.

•in product

Producers

changing

market

trends,

market

and package

are assisted

it such

as

utilization

two

conducts

design

technology

and

Philippine

PITC

is

engages

in

private

enterprises.

engages

in.

private socialist

export

First

sector countries

design,

of new products products

information

style

design

in

free of as

well

to adapt

to

latest

in

of products

the to

suit

foreign

consultations

on

the

for such materials.

awareness

to

the

in adapting

region

to the

Year operated

:

1978

Budget

:

@20.8M

:

145

Complement

Trading

government' s and

import

Corporation

and•

latest

(PITC)

international of

products

trading not

arm.

normally

It pursued

AS such, there are two types of trading is

is

exporters

in design.

International

the

product

and technology.

to help exporters

Personnel

(j)

exports

is

provides

in product

as well as the source

workshops

function it

also • provides

bring

(PDDCP)

Philippine

This allows export

Center

mobiles

and processes

connection,

exporters

color

materials

its seminar

ones.

of

primary

evaluationand

materials,

The

•Its

in the development

provides

preferences.

Its

In this

conditions,

In addition, design

and design.

of existing

of the Philippines

to the marketability

development.

as in the design

proper

and Design Center

trading hesitant

of new non-traditional to engage

that are normally

in.

Second

inaccessible

that

products is

which

trading

to the private

thus by PITC the with

sector.


111

PIT(: also engages producers.

On

in

this

aspect

warehouses

(CBTWs)

materials

requirements.

processing

and shipment

materials

under

Lastly,

the

for

PITC

export

the duty-drawback

PITC operates

front

of line

ICO-CA, the

these

need

for

agencies,

a BETP

to be general

As

a

of

would-be

procedures financing and unit

of

the

the

whose

BETP,

the

faster of

raw

exporters.

the

delivery

regulatory

the

ITG

namely

are

under

task is to address

strategy.

agency.

of

Among

Its mandate

the

the ten

is considered

the nine agencies.

Industry

information

tec_Lnical

in

main

export

lead

government's

thrust to provides,

on setting-up

and raw-material

services Export

and

quality

Assistance

encourage

exports,

free of charge,

export marketing

product

raw

: 217

comprising

and comprehensive

and incentives,

under

for small

Of the ten, three are

documentation,

of

the importation

are involved

The agencies

and

trading

their

benefits

facility

Complement

agencies

the

local

system.

services.

Trade

development,

added

: own revenues

exporters

and

import

Budget

in nature vis-a-vis

for

bonded

: 1977

considered

sign

Department and

is

may

and eliminates

of one undersecretary

focused

custom's

who

the

a @IOM financing

GTEB, Shippercon.

supervision

raw materials

Year operated

ten

export

has

for imports

of

operates

producers

This

Personnel

All

importation

export and

the

exporters

business,

export

promotions,

export

sourcing, control. Network

product A

design

separate

(EXPONET),

has


112 been

set

regions

up

by

One program

to provide

DTI's

of

these services.

regional

the

offices

innovative

is the government's

the

time by which exporters

shy

away

from government

Extensive

paperwork

Stop-Export

export Procedures

This

brings

application,

These

are

the Bureau

Bureau

of Fisheries

(BPI),

Philippine

(PPA),

Garments

Division,

In

of Customs

(see

In this

the

1984.

development to minimize

Most

exporters

time-consuming,

the

and the Bonded

addition

Bureau

paperwork.

regard,

t_e

to

Resources

Bureau

government of export

of Animal

(BFAR), Bureau

(PCA),

One-

simplify

IV.I).

The

OSEDC

is

exporters

export

of

on

garments, and

in

Industry

Ports

(BAI), Industry

Authority of

located

in key export-oriented

Trade at

the

regions,

and Baguio.

Center

of raw material of

Warehouses

matters

to

documentation.

(GTEB), and Department

Custom's

Assessment

and Conduction

such

provision entertaining

as policies of

(OSIDC) has been set

requirements

Division,

action

Bonds

center

and procedures

information

complaints.

by exporters.

Division.

to these, GTEB has its oWn 0ne-stop

assists

offices

of Plant

Philippine

Import Documentation

the importation

houses

(BC),

and has offices

Zamboanga,

a One-Stop

various

Export Board

Table

Trade Center

opportunities â&#x20AC;˘

of

and approval

Authority

and Textile

up to facilitate OSIDC

processing,

Coconut

such as Cebu, Davao,

The

export

(OSEDC) has been established

under one roof

and Aquatic

Industry-NCR

Similarly,

since

the process.

because

in

and documentation.

office

International

present

also gives rise to red tape.

facilitate

and

of the

will go through

Center

represented

to ease on export procedures

services

Documentation

is

and has been operating

features

policy

EXPONET

regarding

Likewise,

a

that

on

the

market one-stop


113 Table IV.I ONE-STOP EXPORT OOCURENTATION CENTER: PARTICIPAT]N6 AGENCIES

Agency

Commodity

Bureauof CustomsExport Coordination Division (BOC-ECD)

Oocuments [ssued

$ Authority to Load ! Special Permit to Load â&#x20AC;˘! Certification of Origin (GSPandnon-GSP) ; Certificate of Shipment ! Certificate of Re-exportation

Bureauof, AnimalIndustry (BAI)

Animaland Animal byproducts

!

Export Clearance

Bureauof Fisheries and Aquatic Resources

Fish andFishery aquatic

! !

Export CIearnance CITESClearance

Bureauof Plant Industry (BPI)

Plants

!

Phytosanitary Certificate

PepartJent of Tradeand Industry, National Capital Region (OTI-NCR)

Handicrafts

I

Philippine CoconutAuthority {PCA)

Coconutand by products

$ Export Clearnance

Philippine Ports Authority(PPA)

Fiber Industry Development Authority (FIDA) Garmentand Textile Export Board(6TEB)"

Special Ooculentation Certificate for Preferential ,Treatment to Australia and EEC

$ Exemptionfrom #harfage Fee for 901 and EPZARegistered Exporters $. Accepts Paymentsfor _harfage Fee

Natural Fibers

!

Commodity Clearance

Garmentsand Textiles products

I

Textile Export Clearance


114 action unit

center has

that

also

serves

been

as

a

complaints,

set up by the Bureau

assistance,

of Customs

and information

and

the

Philippine

on Exports

Procedures

Ports Authority.

The

government

(CEP).

The

procedural need

Commission

sector

Customs

DTI

incentive

underline in

(Philexport)

Commissioner

on exporting

in response

and guidelines

to simplify

has

with

instituted

for

Philippine

an exporters '

exporters.

All exporters

had

at

least 10 exports privileges:

warehouses

for

Philippine

Exporters

Customs

instituted

a

transactions (a)

to

the

export NEDA the

importation

of

by

in

who

have

at least

Registry;

and

(c)

(b)

availment

Foundation

scheme been

full

are

as

an

operating

$100,000

for a 2-year period,

materials;

goverrhment

Exporters

the use of Philexport-operated

and have given

customs listing

bonded in

of the services

the

of

the the

Group in the OSEDC.

subcontractors

sub-contractors. contractors

the

frQm

the

accreditation

at least three years or most have exported

Also,

of

the CB Governor,

exporters,

for

Special

with

and four representatives

its support

cooperation

to bonafide

following

review

as members.

further

t/_rough

new policies

an overall

It is headed by the DTI Secretary

Director-General,

To

undertakes

requirements

or introduce

procedures.

the Commission

periodically

and documentation

to amend

private

has also created

the DTI.

exchange

The program

This enables meeting

important

contribution

linkages.

SUBCONEX

export

matches

the former orders.

of the export assistance

known

sector

covers

as

SUBCONEX

manufacturer-exporters

to have access The

has

also

in the development

the garments,

with

to reliable

program

gifts

and

serves of

been

suban

backward houseware,


115

furnitures

and fixtures,

footwear

and leathergoods,

and fresh and processed

foods sectors.

To supplement is

the

Exporters

exporters exporting would-be a

these services,

and

Manual, a

would-be

including

compilation

of present

with

helpful

to

without

extra cost

exporters

a Registry

it exposes

on their part.

to produce

all

It is for sale

circulations information

to

about

to

world-wide to be very

foreign

of the ten

as a way to inform

and

Exporters,

This Das been found

Likewise, each

to

all exporters

circulated

their products

its brochures

One of these

of Philippine

exporters

and products.

since

for

contains

DTI registered

their addresses

encouraged

which

financing.

publications.

puDlication

It also publishes

complete

also

4-volume

exporters

export

exporters.

DTI produces

buyers

agencies

is

exporters

of

their services.

Recently, with

in addressing

all the other agencies

sector,

under

such as the various

products

for

exports

scheme

is for the government

concentrate that exhibit

Table Agencies

The reason behind

potential. its resources a potential

IV.2 presents

in 1989.

organization,

to serve as a basis

strategy.

export

the ITG in consultation

exporters

export

good

the need to draw up an export

this product

to focus

to products

that

with the

has identified a

BETP

private priority

3-year

product-market

and market

classification

its support

This will enable

demand

for

strategy

on products

the government are marketable

to

that

exhibit

channel

and

and to

markets

support

to

for local exports.

the level of government

financial

ITG


116

Table IV.2 FUNDING AND SUPPORT, (DTI AGENCIES)

GOVERNMENT

Agency

Office 8OI BEMB ClAP CMOF CITC EPZA ICO-CA PTTC PDDCP CITEM BITR FTSC BETP

Fund

of

the

Secretary

1989

Allotment million)

% of

615.423 67.465 3.76i 19.587 13.686 5.411 65.000 4.335 20.542 20.865 47.480 4.'771 i19.183 26.965

I/

Snippercon PITC GTEB

Total

0.41 1.90 2.00 4.50 0,46 11.52 2.60

1.200 2/ _/

0.111 23.5

i/ Subsidy

requirements

on

top

of

operating

budget

2/ Self-supporting Source: General Note:

Total effort

government Appropriative

agencies or Act, 1989

government support for its is reflected in the 23.5%

agencies comprising the ITG to funds alloted to the Department Industry

corporations

export share

the of

total Trade

development of all government and


117 2.0

•A

Service

Coverage

comprehensive

export

development

different

aspects

3udge

from

the

then

it can be said that

it

agencies, export

and

• and strategy

for

(PDDCP),

exporters and

services

programs

the Primary

are amply

•and

(BETP, FTSC),

This

marketing

trade

one

of

an

develoim_nt BETP),

trading

to

these

effective market

involved

the

is

by

negotiations

(CITEM,

(GTEB, ICO-CA)•, international

If

includes

•personnel

and promotion

on how

offered

elements

covered.

government

for.

services

product ••testing (PTTC), product

product

administration

and

(BITR),

in

export

and

design

export'product

(PITC), and

transport

(Shippercon)•i.

Having

personne ! • based

products,

works

exhibits,

helps

strategies.

for

BETP,

the country's

on

BITR • is • involved

regarding

in training

CIT_M its

in

products

tariff

is

identifies

participation

in

and implementation

the other hand,

• techniques

Philippine•

_'_SC

conducts

•new

exportable

trade

fairs

•of

and

product-market

product

studies

on

production

and

commodities.

engages marketing

abroad,

in the development

identified

through

respective

research

development,

these

are aaply provided

strategy

training

can be gleaned

of the program

development

product

program

and

exporters

in

testing

trade negotiations in

various

and non-tariff

the vehicle

GSP,

on basic • export products among quota

for

which

quality are

negotiation

control.

inclusion and

of

negotiation

barriers.

by which

local products

trade fairs and exhibits

are exposed

here and• abroad.

BETP

to

buyers

complements


118 Exporters.

PDDCP provides

and information

on trends

Both

and

GTEB

accreditation Shippercon

of

helps

booking

in

seminars

last year.

increase

various

involved

for garments

transport

January

of

on

while shipping

and shipping.

their has

trade fairs

respective

conducted

in major

14

cities

in

that go to the regions

to

are, however,

a total

lower

handling

Shippercon

holds

and

respectively,

agencies

for lack of facilities.

1989, PTTC conducted

allocation

through

seminars

it has design mobiles

only

quota

on freight

conduct

There

use of raw materials,

and coffee,

and assistance

awareness.

in Metro Manila

in

their products

CITEM regularly

seminars

proper

and shape.

parts of the country.

In addition,

design

are

these agencies

services

the country.

ICO-CA

exporters

of

on designs,

such as color

exporters

rates, chartering,

Majority

service

that

conduct

One is the PTTC.

of 13 seminars

alohe

in

its

In new

facility.

All of t_ese agencies Offices.

These offices

are represented

are located

Oro. For others

such as Shippercon,

shipping ports,

such as Legazpi,

not

of Export

The

effectiveness

of the government's

Development

directly

inferred although

greatly

improved

despite

An

important agencies

Cagayan

de

in other

key

program

may

performance

has

and increasing

Program

export

the country's

constricting

consideration

Cebu,

Regional

Iloilo and Zamboanga.

Effectiveness

in d_nand

like Davao,

Oy DTI's

it _as also field offices

De

these

in cities

3.0

by declines

in the regions

overseas

develo_nent export inarkets

brought

about

protectionism.

to make,

to grab a larger share

however,

is the

of the export

contribution

market

than

what

of it


119

used to be when indicators attest

sucn

direct

exporters

foreign

buyers

resulted

in

exporters freight

total

handling.

exporters

of

using

The

six.

a guided

exports

contributing export

factor

done

export

with a clear mandate and

agencies

also

about

2,424

and

about has

through

its

buyers

that

assisted

1,017

2,162 other exports

96 coffee

of 1987 has

exporters

already

has

program

with

increased functioned

In the performance

and

of

which

on fr_n

trained

180

meager of

accuracy

in

of

trade

for

pinpointing

according

to the

of their

specific

be

and

this

is

exports

to

priority of

a

products.

focused

goal-setting.

This

by

bringing

into one group

This has greatly the

various

tasks, the

overall various

each

reduced

gover_nent

accountability.

gover_aent's

and

to one direction.

bureaucracy

to work on. functions

may

traditional

resources

the

years

policy

enables

international

and objectives

duplication

strategy

two

been the inception

a streamlining

dealing

for the past

from the usual

the government's

through

all agencies

and

4,054

FTSC

foreign

directly

to the classification

develo_nent

in channeling

agencies

CITEM

2,239

accredited

exports

by a shift in emphasis

overlapping

agencies

its new facility.

to

was

abroad,

suppliers.

and trained

PTTC by year-end

attributed

was vital

in

these

sourcing

buyers.

Shippercon

problems

P_ilippine

comprehensive

policy.

$26M.

ICO-CA has already

non-traditional

together

brought

of

Another

This

has

increase

exemplified

with Filipino

foreign

of

in shipping-related

original

partly

sales

their products

with

abroad

by

the BETP has provided

on raw material

linked

on tl_e performance

serviced

of 1987,

information

exporters

efforts

as

in marketing

were

Statistics

of exporters

For instance

given

1,440

pr_notional

the

the number

assistance

were

matched

an

as

to this fact.

exports

384

these were not in existence.

These export agencies


120

came

to

appreciate

exchange

of

facilitated

the

need

information by having

for

closer

coordination

as well as referrals

a regular monthly

among

meeting

through

regular

themselves.

among

This

the agencies

is

chaired

by the DTI Secretary.

A

great majority

of the respondent-exporters

of the services/assistance Most popular which

among the government

helps

programs, products

of certain

exporters

such

as

market

and exporters,

services

of

government' s

export

inadequate;

and

Despite exports,

lack

outside of

additional agencies

three

would

products

to rate

the

Thirteen

having

renewed

services

in extending

IV.3).

is

CIT_

through

various

brochures

listing

overall

of

them

seven

no

drive

closer

non-financial said

said

that

that

knowledge

is still

the

they

at

their respective

offered

all

to

were about

in the

Majority

has

by the fact that most exporters This point

is

region

regional

This

will

country's

beneficiaries

This

the

operations.

services.

the

intended

to be desired.

staff

Dy these agencies.

in the next chapter.

intensify

its

the facilities

for a separate

_he

to

to

for their respective

as evidenced

further

(see Table

by exporters

exhibits,

were adequate;

Metro Manila

accessibility services

government.

admitted

these

aspiring after

asked

government's

personnel

look

trade

availed

services.

funds

are

were

services

bringing

especially by

the

mentioned

for their

encounter,

agencies

having

etc.

the

government' s export

agencies

find markets

Respondent-exporters export

gover_aent

admitted

hampered or of

hire these

offices

hampered

who their

do not know be

taken

of up


121 Table IV. 3 SERVICES OF GOVERNMENT AGENCIES AVAIT_ OF BY EXPOI_ERS

Assets A.

Export

Small-Scale 1 1 •1

B.

C.

C_v' t Agency

.

Services _

1 6 7

56 15 156

1

8

5

1 1

9 10

15 35

1 1 1

ii • 12 14

5 15 25

1 1

17 20

1

21

5

Medium'Scale 2 2 2 3

5 12

CIT_4 PDDCP CIT_ - Exposure of products PITC - Raw materials

4

15

1 2 1

13 15 22

16 nap 135

Large-Scale 2 •5

Assets:

CITEM exhibition Exposure of products FF_C -Exhibit PI%_ - Source of potential Product exhibition

nap• 35

2

2 2 1 3

NOTE:

No.

16 18 19 23

Exposure of products, list of buyers CIT_MInternational exposure GTEB - no red tape Exposure of products PITC - Source of potential buyers gov't promotion of Filipino •products to foreign countries nap regular information about foreign buyers, trends, new decrees •fair/exhibits

Provide information n.a. PI%_C/CITEM

5

n.a.

7 nap nap nap

none yet nap nap nap

1- less than _6b million 2 - P5 million to _20 million 3 - more than _20 million

nap - did not avail n.a. - no answer Gov't Agencies:

1 2 3 4 5 6

of the services

-

PITC PDDCP GTEB ICO-CA CITF_ PT%_

7 - others

buyers

(BF2T)

about buyers


122 B.

The Private

Private

sector

organizations. (i}

assist

products, sourcing,

In

addition,

maintaining

an

private

appropriate

specific

marketing

support

programs The

importation

training

Philippine

semi-government the

product

of raw

a

for

vehicle

agencies

out

form

through

provides

program

to adopt

in the

involved

inefficiencies

development

in

of

and

and

in

order

to

requests

fiscal

shipment,

development,

These

and

for

financial

promotions

and manpower

and

development

programs.

Exporters

Foundation

organization

development about

to point

financing,

the

packaging,

representation

for the government

of inputs,

with

and marketing

serve as

Collective

either

with a

sharing.

and the various

export

andassistance

corporations

financial

organizations

latter may come

of their products,

The

towards

export

together:

themselves

the pr_aotions

programs,

export

of their members.

and information

gover_nent's

exports.

and exporters

profit

the

nonprofit

through

band

to provide

interests

forth for the exporters

reco_nending

incentives,

the gover_nent.

and development.

in

goverlaaent

with

with the government

deficiencies

why exporters

(2)

training design,

by way of the various

and

the business

product

promotions

comes

nonstock,

their m_m_ers

linkages

encourage

are

manpower

material

in export

representation

of pr_noting

organizations

exports

are two main reasons

organizations

purpose

their

for

their own interest;

for collective

Export main

support

There

to promote

medium

Sector and Ex_orts

membership

of

50_

individuals

the me_ership

of

the

active of w_ich

(PHILEXPORT)

intended

to mobilize

country's and

is a nonstock,

exports.

inactive

contriOutes

the private It

exporting to more

than

nonsector

boasts companies

of

a and

three-fourths


123

of

the

total

PHILEXPORT the

was established

general

private

traditional

welfare

sector

fourteen

presence

underscore

provides

the develo_nent

a starting forum

gover_nent

of government

to

propose

the

objective

a

joint

export

country.

of

promoting

government of

industries

and

Trustees, and

seven

agencies.

representatives link between

in its Board

exporters

of local exports.

point to lobby

of

by a 21-man Board

of the different

its role asia primary

in fostering

through

It is managed

of the different

exports

the prLmary

of local exporters

of these are heads

The

a

in 1984 with

initiative.

undersecretaries

and

and non-traditional

effective

measures

of Philippine

Exporter

and the

PHILEXPORT's

for govermnent

for

policies

to

government

strong

incentives

and

serves

linkage

exporters

pertinent

to

exports

The Confederation nonprofit

organization

its

main

objectives

and

to

seek

msnbersnip

Some have

being worked

another engaged 250

support

individual

industry groups

m_nbers

agreed

The

300

and

assistance

exporters

and

in principle

Like PHILEXPORT,

exports.

corporations

COPE's

comes

involved

from

in exports.

of PHILEXPORT.

The details

nonstock,

of its member-exporters for

and trade associations

to merge.

private

in 1973.

the interests

of COPE are also members

Lately,

of the merger

are

they still

out.

Philippine private

Chamber

organization

in local _andicraÂŁts.

members

established

are to promote

government

of

the different

of exporters

(COPE) is

to date.

PCHI's

of Handicraft

Industries,

ofmanufacturers,

producers,

It was established efforts

are geared

in 1984 towards

Inc. and

(PCHI)

is

exporters

and

_as

about

the

development


124 of

small

and

handicrafts

medium such

other

promote

trade

t/leir business

was established the

in

established

counterparts;

benefits

come

information as

well

pertaining

The

the

per

of the need

the

deficiencies

benefits

aside

inputs,

services raw-material

exporters.

A listing

in Table

and/or

demand,

exports. for

These

provides

their

some

bigger

efforts

of

of

on

the the trade

a

product

on

matters

these

associations

trade

export

come

in

acquisition

of

local

on market

trends,

to

development

an exporter

benefits

arises

in response

by the government

information

price and recent

It

including

measures

in the goverr_ent's

exporters,

sourcing,

exporters.

up-to-date

some

or trade

supplementary

provided

Federation

government

of

to

IV.4.

organizations

from those already

the

export

For Philfoodex,

the latest and

from

are

in order

Like

of self-help

industry.

in these organizations

develop

such as market

is given

or inefficiencies

Membership

marketing

industry.

for stop-gap

of local food

with the same producers

assistance

of umbrella

program.

to

food

industry

existence

out

program

dealing

as in see_ing

to

associations

exporters

different

is tX_ Philippine

are examples

to a particular

there

themselves

in the country.

in the form of exchanging

among

the

it has 62 active members

food corporations

in

and handlooms.

of

links among

all

woodcrafts

of exporters,

each

Anexample

To date,

belonging

textiles,

organizations

close

sectors

shellcrafts,

an association

trade associations

part of exporters

â&#x20AC;˘line

1980.

product

baskets,

within

interests.

(Philf_)dex),

ten

house

associations

whose aim is to maintain

of Food Exporters

of

house ornaments,

from these big umbrella

smaller

sectors

in

as toys, ceramics,

and paper products,

Aside

enterprises

additional

through

its

form

of

the or

imported

and trade prospects

and training

assistance

for


125

TRADE

Table IV.4 ASSOCIATIONS OF

INDUSTRY

Footwear,

Bags

and

EXPORTERS

TRADE

Belts

Association of Footwear Industries of the Philippines Marikina Footwear Development Council Association of Philippine Leathergoods Exporters and Manufacturers Footwear goo_s

Jewelry and Accesories

Giftsand

Fashion

Toys

and

Other

Commodities

Linens, Handweaves Houseware

Construction

and Integrated Leather_ Industries Foundation

Fashion Accessories and Jewelry Associations of the Philippines Fashion Designers Association of the Philippines

Baskets

Fruits

ASSOCIATIONS

EdiDle _

and

Community Crafts Association the Philippines Philippine T_y Manufacturers Association, Inc.

of

Handloom Weaving Association the Philippines Philippine Toy Manufacturers Association, Inc.

of

Philippine

Association

of

Fresh

Coconut Exporters, Inc. Philippine Mango Exporters Foundation, Inc. Philippine Banana Growers and Exporters Association Coffee Exporters Association oÂŁ the Philippines Knitting and Weaving Association of the Philippines Philippine Association of Einuroidery and Apparel Exporters

Export of G.I. Wire

Metals Industry Association Of

Council the

Philippines Philippine Electrical Suppliers Manufacturers Association, Philippine Cement Manufacturers

Inc. Corp


126

INDUSTRY

Home Decor, Accessories,

TRADE

Furniture Furnishings

Antique the Ceramic

ASSOCIATIONS

Dealers Association Philippines Association of the

of

Philippines Ceramic Export Manufacturers Association, Inc. Lamps and Allied Electrical Products Manufacturers of the Philippines Marine Products Processed Food

and

Ot_er

Association of Shrimp Producers and Exporters Philippine Food Exporters and Processors Organization Philippine Tuna Producers and Exporters Association Philipplne Federation of Food Exporters Tuna Canners Association of the

Industrial Supplles, and Equipment

Parts

Philippines

Philippine Association of Electronic Exporters Metals Industry Council Metalworking industries Association of the Philippines Semicoaductor Electronics Industry Foundation, Inc.

Non-Rattan Furniture and Components

Philippine Wood _roducts Association Pipes and Tubes Association of the Pnilipplnes

Garments

Confederation of Garment Exporters of the P_ilippines, Inc. Garments Business Association of tne Philippines Textiles Producers Association of tile Philippines

Others

Association Coconut

of Philippine Dessicators

Association of Philippine Copra Exporters, Inc. Philippine Bonsai Society Samailan sa Pilipinas ng _nga Industr iyang Kimika


127 An essential product

promotion

foreign

buyers

advantage

buyers

rendered

an

exhibits

These organizations

foreign

exporter

to prospective

come

by these organizations

and marketing. and/or

for

referrals

service

organizations

in the exposure

buyers.

when

Opportunities

they

sponsor

organizations,

likewise,

provides

convenient,

reliable

and

Another

important

organizations

contact

benefit

is in the sourcing

inputs.

PHILEXPORT

(OCBWs)

for the importation

provides

members

duty-free facility. release

availing export or

of

exporters

are

must

exporter

CCBWs

is open

to members

the exporter

exporter

must be personally

guaranteed

accreditation accredited,

committee. they

and

For

may qualify

new

any

exporters

or

for

bonded

imported warehouses This tax and

simplified processing

non-members at least

import for

alike. a

the

member those

if they can get endorsement

period

Otherwise, of

the

PHILEXPORT's

who are not from

In

cumulative

for any two-year

good-standing. by

exporter

its members.

of a

should have

of

single,

with goverD/nent agencies.

of $100,00_ and ten transactions

De a BOI-registered

a

inputs through

tedious

when dealing

these

joining

needed by

by

potential

and exporters,

common customs

burdened

as

with

especially

way of obtaining

well

trade

with

in

as well as the convenience

this service,

performance

exporter

of raw materials

of their input requirements

PHILEXPORT' s

an

of raw materials

with an economical

Most

buyers

added

foreign

Enlistment

local producers

for examplemaintains

importations

fairs.

of

in

with

an

as

for contacts

foreign

for

therefore

participate

trade

with

have linkages

of his products

about when these organizations

and

and

is in the form of

BOI

yet while

â&#x20AC;˘


128 endorsement

from any two of PHIr_XPORT's

BOC in order

An to

to be able

important

indirect

end-products

to avail themselves

feature

exporters.

certification

Indirect

important

helping

program.

exporter

individual

irrevocable

assists

indirect

This

exports

or

borrow

from

for

Livelihood

their resources

members.

The details

a loan.

that

the

development

loan scheme

together

PCHI

has three schemes.

One

credit

services,

through

form of

Development

One

it

PCHI-TLRC

for small

packages

are open

0nly

these organizations

provide

of

export is

market

training

and

that provided

which was established

the order

record

in

hard

to

financing

to offer

in Table

on trade and

of

a

subcontractors

are given

such service

Foundation

track

by

has

purchase

and find

the

of

but loan

through

enough

information

sponsorship

(TLRC)

limit

sufficient

of these three programs

its

-

Center

Another

Lastly,

These financing

programs. and

package.

to

such

of collaterals

programs.

provide

One

or subcontractors

to these benefits,

consultancy

training

Research

secure

which, may be availed

his packing

has the small subcontractors

for

members

program

financing

reached

exporters

a loan

Resource

financing

those who are short

addition

secure

[/3 in his favor.

other financing

can pool

In

open

first

they are linked with

is for those who have yet to establish

security

and

msmbers

T_e PCHI-TLRC

who has already

or

financing.

program

however,

these organizations

of loan is the letter of credit

program

must,

it is also

services

is the joint Technology

confirmed

and/or

will be exported.

program

who

exporters

is that

whom

is

an

CCBWs

exporter

members

type

or from DTI, CB,

of the facility.

of PHILEXPORT's

from the direct

One of the most

financing

Trustees,

by in

these to

as PCHI

IV.5.

exporterprospects, manpower the 1984

PCHI as

a


129

Table IV.5 THE PCHI-TLR_ FINANCING .__

: : :

PROGRAMS

, ,

LC Financing "Balikatan sa Kabuhayan"

Purchase Order Financing Under ULFP

Socialized Scheme

Credit

: : :

P200,000.00

P100,000.00

PI0,000. _0

:

Letter ofl Credit*

Purchase Order From Exporter

Purchase Order FrQm Exporter with PCHI Endors_aent

: : :

:Collateral/Security :

Soft***

Soft***

Collateral

:Maturity :

60 to 120 Days or Life of LC

60 Days

60-90 Days or Life of Purchase Order

80%of

50% of Purchase. Order-One R_lease 70% of Purchase Order-Staggered Release

50%-70% of 'I_tal Appraised Value of Collateral (for Single/Staggered Releases )

14% Per Annum

15% Per Annum

v •

:Maximum

Loan Limit

:NegotiaDle : :

Document

Pool**** : : : m

:Loanable : : : :

Amount

LC

v

: : : : : u

:Interest

12% Per Annum

: •

:TL_C Filing : :

Fee

:PCHI Processing : :Principal : : :

5% Per Annum

Fee

Borrower

2% Every Months

Six :

500.00

300.00

200.00

: :

LC Beneficiary

Purchase Order Beneficiary

5-15 Members Signing Jointly and Severally.

: : :

Notes: * ** *** *****

Only Confirmed and Irrevocable Letter of Credit payable at sight than 60 days maturity data. Purchase Orders 60 days or more in Duration. Soft Collaterals: Office Equipment, Household Appliances. Issuer of Purchase Order Co-signs the loan. If t_ze collateral of the loan is not enough, the Purchase Order Issuer co-signs the loan.

with more


130 clearinghouse members to

for subcontracting,

and non-members

foreign

market

buyers

and product

There represent

are

to

point

of

or

either by

• Bureau

the

of

of

a

regarding product

system

is

for

the

financing

jointly

PHILEXPORT

allocations.

traders for

Bank

as

with

such

charged

for exporters.

such

as

other

in DTI's

by PHILEXPORT

exporters

when

handle

the

therefore,

services may

such

in cases

of

as

where

the

there

agencies

program;

On

offered

facility

government

Registry

be

expeditious

guarantee

and the DTI.

lower these

for

financing

tax

Lastly,

agencies to a

of

or

programs

•or _MYC;

and

the

through

fiscal

training

such as the PCHI-TLRC

PHILEXPORT,

is

endorsements

for financing

or

simplification

for individual

pTrc

these

are

of any of the government

organization

by DTI to

these

for export papers.

gaining •accessibility

undertaken

of

Second

the different

as enlistment

First,

for exports,

and development

such

can• effectively

in the form of

assistance

in the case of PCHI;

prcm]otions

Exporters

and

opportunities

the

is •small or new. These

agencies

between

export

agencies,

or availing

the manpower

Customs;

tie-up

for both

to air their grievances

Examples

endorsements

export documents

like Philguarantee is

valuable

exporter

government

processing

financing

assistance

for accessing

the

in the system.

by the Central

@rovide

if

for exporters

and quota

liberal

government

especially

wider

organizations

with the government

charged

organizations

exporters

with the government.

tape in government

bargaining

rediscounting

seeking

red

procedures,

incentives

with

these

of their members

deficiencies

import-export

them

sharing

development.

serve as a platform

elimination

and information

It has also exposed

three ways by which

out

collective

alike.

and has provided

the interest

organizations

trading,

and for

Philippine the

latter,

registration/accreditation evaluates

applications

and


131 issues certifications,

which

in turn are used as a basis

for the enlisb_ent

in the registry.

Overall, of

local exporter

local producers

local products

V.

EXPORT

export

export

chapter

SYST_

earnest

efforts

to increase

by-product

the

share

of

IN THE PHILIPPINES

is divided

system

experience

into two sections.

in the Philippines

and

policies

The first

and the second

as well as

describes

discusses

exporters'

the

banks'

experience

with

financing.

A.

The Export Financing

Actually,

there

Philippines. institutions, Central

Some

of

them

by a discussion

schemes

export

by non-financial

refinancing

rediscounting facility

to understand

of export

financing

administered

scheme

by

lending

To better

in providing the overall

The

This

is

system

on

The export

the end of this section.

of the Central

facility.

banking

the

financial

first.

to exporters.

ScHeme of the Central

scheme

in

institutions.

discussed

programs

toward

schemes

government

government

will be

will be discussed

The

important

are

and the various

Export Refinancing

rediscounting

in the Philippines

of the role of the co_nercial

1.0

overall

System

a number

refinancing

financing

guarantee

exist

while others,

Bank's

followed export

are an indispensable

in foreign markets.

financing

finance

and traders'

FINANCING

This

organizations

credit

monetary

Bank

Bank

appreciate

is a part

of

its

the

of

the

to the export policy

role sector,

of the Central

it Bank.

is


132 Liquidity Bank.

This

rate-money a certain

is anchored

period base

manipulating

greater

and

credits

hypothesis

linkage.

consistent

components

of

the

inflation

rate target

Bank then determines with that target.

of the monetary

Central

of a strong

Once an inflation

on, the Central

that is deemed

components

Net

Domestic

by

and

respect

to

instance,

others its

from

conducting selling

the

for

level

It does

base over

which

this

it

allowed

Bank

its

increases

has

liabilities

is literally

to increase,

window

may

be

(e.g.,

(i.e., Treasury

kept constant,

but the increase

Bank may

CB bills,

while

with

NCDMB.

For

monetary

do

In

by

repos)

or

the

by an equivalent

by

this

in the latter case,

is offset

base

offset

reverse

bills).

loans,

monetary

completely

The Central

Bank

in the

in the

net hanks

of export

in an increase Increases

money

the

its rediscounting

readily into

Central in

Assets

more

to the deposit

equal.

operation.

be

decomposed

is reflected

resulting

own liabilities

Treasury's

can

The action of t6e

window

ultimately

market

The latter

(NCPS), net credit

things being

open

base are the Net Foreign

NDA can be further

tile rediscounting

either

case, _DMB

Bank.

rediscounting

other

an

National

(NDA).

(NDAOTHERS).

increases,

assuming

arising

Assets

sector

if the Central

NCDMB

of the monetary

the Central

to the public

(NC[AMB),

base,

base

is decided

the

major

controlled

then

on the classical

functions

control.

The (NFA)

is one of the major

supply-monetary

of monetary by

management

former

NCDFB

is

decline

in

the NCPS.

The November allocate Within

rediscounting 1985. credit the

Before

facility

of the Central

this period,

to high priority

export

sector,

Bank took a major

the rediscounting sectors,

including

the non-traditional

export

facility the

turn

in

was used

to

export

sector was

sector. given

a


133 preferential

rate over

the traditional

for the former was three percent lending

export sector.

per annua with a prescribed

rate of banks at 12 percent

per annum, while

eight percent

per annum with the ceiling

at 14 percent

per annum.

Starting Bank

has

been

allocating value

eligible

November used

credit

that

the

papers

production working Bank

in

Central at

stabilization

sectors.

cottage

financing,

rediscounting

a uniform

it was

of

the

rather

than

of

include

credits,

short-term

for

rate that is aligned

loan

for

all

agricultural purposes

The

another

with the

for

the

general

credits.

fixed

Central

standardized

papers

industries

and other

rate of banks

the proportion

for 90 days renewable

rediscount

for the latter,

window

has been

Eligible

and small

on the

purposes

Thus,

Bank rediscounts

8_ percent.

and capital

Moreover,

for

rate

ceiling

on the lending

1985, the rediscounting

to priority

credits,

grants

more

The rediscount

Central 90

days.

market

rate•

14__/ has

been

Although Central have In

(see Table

Bank regularly

effect,

monitors

rediscounted,

loans refinanced

study indicated loans

This is

on banks

by the Central own funds.

that it charges

before Central

adjusted

lending

t/%e interest

and when necessary

those funded by hanks'

export

V.I).

there is no more ceiling

been

than our

applied

rates,

every

nevertheless,

rates especially exerts• moral

between•17

Bank rediscounting

the

on loans

suasion

Bank have lower

For example, one

quarter.

on

banks.

interest

bank

to 19 percent and 14 to 16

that

rates

included per annum percent

in •on per

i:

14--/ The rediscount rate is based on the MRR90 (Manila Reference Rate). The old MRR is based on the interestrate on promissory note with a 90-day maturity. TOe new MRR90 which appeared starting January 1989 is based on the weighted average of the interest rates on promissory notes and time deposits with a 90-day maturity.


134

Table V.1 CENTRAL BANK REOISCOUNTIN6 POLICY,INFLATION RATE ANDVARIOUS INTEREST RATES

Year

Date

CB Rediscount Circular Rate Number High Low (%p.a.}

Loan Value High Low (Z p.a.)

I Lending Time Treasury Reverse Domestic U.S. U.S, ] Rate a/ Deposit Bill RepurchaseInflation Inflation Prigs ](Secured Rate a/ Rate c/ Rate Rate Rate Rate : Loans) l(Z p,a.} (Z p.a.I (_ p,a.) (Z p.a.) (_p.a.) j% p.a.) {_ p.a.)

B5-19-78CLR618 198B_9-24-91 CLR762

9.B0 9.Bi

1.Bi I.BB

IH IH

50 : 58 :

198182-27-81 CLR784 83-18-81 CLR786 g6-18-81 CLR883

8.88 8.88 8.88

3.88 3.08 1.8g

1g8 IBB 188

16.g8

16.74

12.55

12.39

18.4

18.88

198285-23-82 CLR938 1983

B.g8 B.8g

1,88 1.g8

188 188

88 I 88 [ 88 I I 88 _ Bg ]

17.13 21,28

15.81 15,38

13.79 14.23 1_.93

18.21 18.17

6.2 3.2

14.81 18.78

88 I 88 ] 88 _ 88 ]

39.18

24,16

27.16 29.25

58.35

4.3

12.84

28.38

21.83

19.65 24,18

23.18

3.6

9.93

14.8e

12.14

.

17.b8

15.24

1984BI-23-84 CLR991 LR-6 I.R 83-12-84 CLR994 HRR-6 MRR-12

188 98

1985 85-38-85 CLR1863 BRR-3 MRR-12 11-22-85 CLR1886 12.75 12.75

98 88

198689-1-86 CLR1114 11.75 12-15-86 CLR1125 IB.H AVE12.27

11.75 18,00 12.27

8B 88

88 ] 81 I

17.38

14.77

16.98 13.25

8.75

2.1

8.32

1987 1988

ll.H 18.08

88 88

BOI 88 I

13,38 15.92

9.77 13.16

11.58 11.64 13.59 9.85_b/

3.79 9,06

3.6 4.8

8.28 9.31

CLR1125 18._8 CLR1125 10.88

NRR- Honetary BoardResolution LR- LendingRate a/ - NeightedAveragefor all maturities b/ - Neighted_verage for TransactedRates c/ - MeightedAveragefor 91-day T-Bill rates SOURCES : CBReview(various issues) CBAnnualReport (various issues) IMFInternational Financial Statistics (various issues) IMFSurvey(_arch1989)


135 annum

after

commercial

In

rediscounting.

of the loan value and rediscount

seems to have

lost its advantage

rediscounting silently

policy.

pursuing

understandable

to

In

an

since

to

the

export

reality,

however,

export-oriented

the Philippines

rediscounting sector,

rate,

over other priority

former

on export

the

as

the Central

loans

the non-traditional

Bank

the

sector the

new

has

been

This

is

with a balance-of-

it is easier

than on non-expOrt sector

under

policy.

has been confronted Indeed,

export

sectors

rediscounting

in the. last few years.â&#x20AC;˘

situation

obtain

the

usually' refer

rates.

terms

payments

Banks

for

loans.

is given priority

banks Within

over

the

on

the

f

non-traditional

Banks

sector.

can be credited

same day that _they apply order and

are su_nitted

Currently, to the

monetary

policy

This is reflected a forecast

could

allow

year

to validate

our

framework

export

not be grossly

quarter.

in the rediscounting

for the reference

which

Trade

above,

Bank

all papers

liquidity.

This forms of export

quarter. Statistics

term forecast

the projected

loans will cause an increase

affected

from easy to tight

is headed by the Central its medium

provided that

Bank sees to it that the export

(i.e., a change

every

with the Central

are

in

noon.

window will

Study Group on External Committee

before

in the way it manages

of exports

the net increase

account

for rediscounting

the Central

the rediscounting

in their

sector's

access

by any change monetary

The Central the basis

for

policy).

Bank

makes

determining

loans that the Central

Aside fr(_n this, and Projections Bank meets

net increase in NCDMB, which

in

Bank

the

Interagency

Foreign

Operations

with exporters

of exports.

in

Thus, going the

twice

a

back

to

rediscounts

in turn will

exert

of an


136 upward

projected t_e

on the monetary,

pressure

increase

base,

in the monetary

rediscounting

of export

other

base arising

loans exceeds

consistent

with

the inflation

rate target,

downwards

its

rediscounting

of export

open

market

its targeted

operation

been above

It

suggests

in

the case where reverse

that rediscounted

government,

to

towards

its

liquidity

rediscounted

subsidized

endorsed

deed

of

refinanced domestic

by

window; ensures

regardless

loans

including

Bank

original

to the Central

In

in

is thought

it will

to

be

engage

in

base

to

in the monetary

Bank's

repos and

the Treasury

exporters (2)

export

byCentral

the following

effect,

sector's

loans

Indirect

Bank's

monetary

appeared

approach access

to

policy; to

and

have

been

for its loans

note of

the

order

direct

with

who

coPY

(PO)

exL_orters may

to

exporter

banks; original

exporters

order or sales contract

(i) from

government.

Bank by commercial

Bank.

the

automatic

continued

as collateral

of

and by

somewtmt

Central

copy of the promissory

only loans

Bank,

conciusions:

of the prevailing export

rate.

bills were used.

have

the

Treasury

rediscounting

subsidized

and copy of the L/C, purchase

the Central

L/C, purchase

been

Bank and the national

requires

assignment; (SC).

the Central

Bank,

window

banks:

duly

contract

Rather,

lead us to the following

managemenÂŁ

by the Central

The Central commercial

increase

Bank will not adjust

rates on reverse

in the case where

rediscounting

the rediscounting (3)

loans.

loans have

point of View of the Central

access

the Central

the

repos were used to mop up liquidity,

So far, the discussions the

the level that

If

level.

nave consistently

national

being equal.

from the net

to bring down the increase

Table V.I shows that the interest bills

things

of

or

sales

are

being

be

holding

final exporters

are not


137 given access

to the rediscounting

window

of the Central

least two reasons

we could think of why the Central

loans of indirect

exporters.

is

afraid

that

rediscounting the

it might

window

pre-shipment

traditional.

loans

can

adequately

financing

access.

meet

Bank

aggregate

Whether

that

percent the

result the

rediscounting

especially

Bank's

window.

banks

two

in

impact

of

This

is

probable

schemes

effort In

schemes

value

is,

loan rediscounts.

to reduce

to commercial

of

the

in 1980

ratio

the ratio of loans outstanding

of

V.2

about

one

sector

banks

to

as

a

access

to

outstanding

export

has

by the

have been above

of

Table

sector's

the loans granted

since

the

construed

to commercial

banks

to

of

of the export

the export

exports

of the

as an indicator

this should not be

Also,

can

below.

rediscounts

years.

reason

that indirect

financing

in the access

fact,

still system

base.

The other

from nine percent

for refinancing

of the total loans granted decline

financing

of indirect exporters

Bank export

However,

to total outstanding

Bank to commercial

is

the possible

financing

to export

a decline

window.

in the last

that

Philippines

these alternative

banks

to the Central

of the Central

It is to be noted

(1988) uses the ratio of loans outstanding

in 1988, suggesting

rediscounts

The

special

the financing requir_nents

the ratio has fallen

rediscounting

its

export

in the last chapter.

to commercial

access

the

Bank

if it opens

on the monetary

a big issue which will be discussed

Central

in

Bank regarding

exporters

there are several

base

of borrowers, system

are at

is that the Central

of the pre-shipment

detail

The World Bank study

shows

range

of indirect

in greater

reason

There

Bank does not refinance

of the monetary

fears of the Central

is that presently

course,

to a wider

Modernization

refinancing

exporters

lose control

export

could help allay

discussed

One probable

Bank.

risen Central

85 percent

1984

(see Table

the

Central

V.3).

Bank

to


138

..tu_

•I

,I

=:'-,=.i,x., =L:E I'-" "_' LZ. '1_

_¢_ (,=) (.',','_ O

I-,(.9 _.n

_

_

000000000

_.-,=_N_

OOOOOOOOO t_

1-4

_._._ _._._._._._.

_.. , , , ,

_°"-= '_ It) 0,,i _') _3'

O_ _

_

0"

N "==

_, 0,1 ¢D,I',,-

_

_" I1_ 1=

._ ffl I_ ,"_ i_ _l"

,,,_ _. ,_

_,_

| ....................

=========

,__ _-__

_, 0

,0_

:_ "_ "

•-_UI

! _

0

g

_

=_

(;_ _'-, C_ (_ _

•,.

_

,,_

I

i I_

q..v

..................................

o

0

_

.................................. _, It'3 N O't _,

..............

_ •_

--_ ......

L

i

_

=


139

LOANS

GRANTED

BY

THE

Table CENTRAL

(In / (a) i/ Total

1980 1981 1982 1983 1984 1985 1986 1987 1988

(b) Traditional Exports

38,707 46,096 39,121 28,229 14,392 7,040 9,696 5,173 9,582

20,000 19.,571 15,459 8,256 1,568 575 2,251 1,485 2,150

i/ Includes Source:

other

Central

loans. Bank

V.3 BANK

TO

COMMERCIAL

BANKS

M) (c) Non-Traditional Exports

11.,607 13,684 10,833 12,028 10,805 5,787 6,322 3,493 6,959

b

+ c a

0,82 0.73 0.67 0.72 0.86 0.90 0.88 0.96 0.95


140 commercial liquid

banks to export value

situation

2.0

commercial

exporters. Acapulco

It dates trade

commercial

was

Banking

banking

system

Table V.4).

established.

colonial

During

the

exporters

there are 30 omnnercial

discussed

highly

below.

Manila-

colonial

period,

to the US.

two are goverr_ent-

Their

combined

of the financial

are authorized

supporting the

products

of which

banks.

of

when

American

banks

of foreign

banks

period

of primary

of the total assets

Ten commercial

to the

has had a long history

back to the Spanish

about 61 percent

be attributed

Syst_n

and four are subsidiaries

comprise

perhaps

This will be further

banks were supporting

At present, owned

of most banks.

The Commercial

The

could

to operate

assets

system

as a

(see

universal

bank.

Commercial facilities banks

financing

offer

to exporters.

to exporters

acquisition

Line.

banks

in each stage

Under this arrangement, his

collection

collection

not

be

Financing.

paid.

The other

by discounting

Exporters

is

Unfortunately,

the bankers'

material

post-shipment

the Export

Bill

to the exporter to

him

should

Doc_nentary

the bank can immediately

the loan categories

way by which we could determine

through

c(_mercial

from raw

One is through funds

financing

by

may obtain

with recourse

Table V.5 shows the loans outstanding 1987.

operations

the bank provides

documents

post-shipment

loan may be granted

two ways.

Under this arrangement,

to the exporter

and

of business

of goods.

in at least

purchasing

pre-

Pre-snipment

to the shipment from banks

both

by the

Acceptance

provide

funds

acceptance.

of ccn_ercial

banks

are too aggregative.

pre- and post-shipment

from 1980 to There

is no

loans since both are


141

TOTAL

RESOURCES

OF (In

Table V.4 THE PHILIPPINE Million Pesos)

i/ FINANCIAL

SYSTEM

1988 March

2/ Commercial Thrift

Banks

banks

Specialized Rural

318.2 285.0

Government

BanKs

26.5

BanKs

Non-Financial

10.0 Institutions

122.7

1/ Starting December 1986, data of assets/liabilities of one ment bank and one commercial National Government.

reflect the specialized bank to the

2/ As Source:

of

November Central

1987. Bank

of

the

Philippines. w_

transfer govern-


142

_

1"4

,

"_'_,,,D oo

oo 0'_ ,.--I

O'_

o'_ i._

oO r'..,.

,.-4

¢o o_

c'q ,-.*4

_:_ ,-I

_ ,-,.,I

co _:_

_

r'... o'_

,,.o

,--1

',_ t"-

_ _ O_ r.,-I

r'..-

¢_1

O0 _D

C_ _" u'3 i--I

_, _ I",. _

,--I _

¢"D _O

_D _ _ c,3

t.t3 OO _

_,_ _'_

C'_l ',_

,,-4

,_ ¢v1 r'....

._

t_ ,-I

¢'N _O c_l

_ {N

_

r'.--

¢'q co

,-...i

,-I ,-I

o'_ z.,_. ,.-I

CO ,.--I _D

0'_

,-i ',.o

_ .i.-I ¢'N c,3

r,_ _1

C_l CO _ r'..-

,--I

,'-'-I"

,-t

rN ,-4

'_ "_

_:_

Lf'l c,3 _-_

_o oo

i

_, .1._,--0 _'_ ,-_

_ _ ._ o .,-4

4._ U'_

.,_ _ .,_

4J

_,_

,,-..I

_

_

._

Mr",_

4._.

-f=t

,-1

°i

o_.=1 4-= ,_

_ _o _ _ _ _ ,,-, _ _

4J •,,,_

"


143 1_

together

dlscounts."

other

types of loans under

A rough estlmate

Is obtalned dlscussed

wlth

from our survey

of the slze of pre-

the

banks

and

"loans

and post-shliammt

of a sample of ccmmerclal

in the next sectlon

item

whlch

loans

is

belng

.

15__/ 3 0

Speclal

Desplte n_nber

of

Credlt

flnanclal speclal

the Phlllpplnes

st111

There

lacks flnanclal

these

ones, are externally

programs

that

some

sectors

enterprlses) they

is to augment

are

of the economy

are percelved

speclflc

sectors

them to monltor

It should, cc_pletely

as elther

sense

instance

the

agrlcultural credlt

however,

that most

from the myrlad

asslstance

credlt

For one, these programs

Loan

and agro-processlng w_ich are dlrected

Fund

range

(ALF)

industrles, to spec_flc

and

system

it is

Thls

section

partly

draws

because

easler

to for

0

have features launched

by

are less speclallzed

in

of

caters

programs

beneflclarles

For

to

all

In contrast commodlty

from the Lamberte

is

ventures

practlcally to

the

groups

15/ .

of

medlum

thelr asslstance

of these programs

of speclal

reason

buslness

to dlrect

they target a much wlder

Agrlcultural

programs

by the banking

in th_s manner,

of thelr

growth

especlally

Another small

a

thls

one of the purposes

or unprofltable

the effectlveness

government that

because

be noted

programs,

(e g , agrlculture,

too rlsky

for

to support

of the country

low prlorlty

of the economy

credlt

malntalns

reasons

resources

Obvlously,

too have thelr procllvlty

dlfferent

the previous

resources

st111 glven

And donor agencles

funded

st111

are several

should be noted that most of these speclal

the larger

the

hberallzatlon,

credit programs

One is that the country It

Programs

study

(1989).

prevlous Also,

the


144 interest rates of most of these programs have been aligned with the rate,

in contrast to the highly subsidized interest rate of

the

market

previous

credit programs.

The Note

major

that

features of these programs are summarized

Table

V.6.

and

Loan

Fund

we have included here the industrial Guarantee

in

(IGLF) because it is utilized mainly as a lending mechanism, rather than as a

guarantee

mechanism.

oriented

and

oriented

industries.

Some of these programs cater

to

export-oriented industries, while others,

both

only

domesticto

export-

The features and performance of these programs

will

be discussed individually below.

(a) The Agricultural Loan Fund (ALF)

The IBRD

ALF

is managed by the Central Bank with assistance

($100M) and

traditional

USAID

($20M). It

sources of farm credit.

iS

envisioned

to

coming

fr(_n

supplement

Single proprietorship,

the

partnerships,

corporations, or cooperatives may avail of the ALF credit to finance working

their

capital requirements and fixed assets acquisition, excluding

purchase,

for

available

to

their both

agricultural and agro-processing domestic-oriented

and

projects.

export-oriented

land It

is

agricultural

producers through a network of accredited participating banks.

The ALF

is

designed in such a way that the end-user borrowers and banks participate in the

financing of the project.

have

an

below, _5M,

Specifically, an end-user is

equity of 10 percent of total project cost for loans of 15 percent of total project cost for loans over pIM

or

required

20

participating

percent

(referring to

banks total

of total project cost are

required

to

put

for up

loans 10

but

over

percent

cost less borrowers' contribution) of

_IM

to and

exceeding _SM,

of _IM

while

subloans but

not


e_

_: _.,

,

,,, , : L_

LL

!

=_.

_ ==

,_ =,

,.,.,,..., #..1..I

_N

_._

_-_

_.

_ _' "._

_

......

_ _

__

_

_ ___ _ ,-,-,

_

___ 4,--1

_

.-._

,=._ - _ ,_=_ -_

_ _, . _ _'_ ._

-_ ,-,-,-

__

-

e,e-_ _

o._ _-_ _ ..,-,

_


_N ,--

¢JU

w

.....

¢_

.... ¢j-'j

m

LLI

_--

....

LLI

_ -_

¢:_

_

_j

"_-

_,

N _

_

N

N

_1:

g

__

_L

_,_

__ _

_

_

_

J,

_

_


147

exceeding the

_5M and 25 percent

loan

amount,

limitation not

inclusive

12 months,

interest

is

based

administrative weighted

Central

while

either

costs,

is

interest

long-term

loans

an element

higher.

This

rate on ALF credit

banana,

coffee,

most of it. industry.

the rediscounting rate.

the Central limited

down

loans

should

15

years

rates

to

of banks.

Bank.

cacao,

Banks

banks

related

risk;

and

time At

or

the

deposits,

present,

is 10.7 percent, rate.

There

the which

is

1988, there

of ALF by investment

no

was

a

47 percent

and commercial

crops

(i.e.,

prawn),

with

sugar

sources

and

Bank despite

prawns

of funds

its relatively

Another

reason

of the project

cost

(net

the Central

Bank.

why banks

higher than

contribution

of

in the case of rediscounts

This could be one of the reasons

for than

maturities

is that banks'

of

sugar,

the ALF facility more attractive

is that ALF loans have longer

with

in 1988.

About

is one of the largest

to 20 percent

area

at ;J799.TM.

and fishery

of the Central

10 percent

their rediscounting

ALF,

exchange

As of December

valued

consider

rediscounts.

compared

the

to

banks.

One reason

only

on its ALF credit to

than the rediscounting

Thus, ALF

window

Bank's

contribution) Central

as to

borrower

exceed

every quarter.

to participating

point higher

on the relending

the export

is

Short-term

system, s savings

the total loan value went to the export

interest

single

should not

of foreign

is reviewed

total of 549 loans were granted

covering

is no limit

the

Bank charges

Table V.? shows the loan availments

ramie,

not exceed

the cost of borrowings

and

total of 83 participating

A

There

Bank regulation.

cost of the banking

0.7 percentage

ceiling

it does

rate that the Central on

average

whichever

is

that

over _5M.

of a grace period.

The banks

provided

under existing

exceed

of subloans

borrower's with

recently

the

slowed


148

Table V.7 • ALFAiD I6LF LOANAUA]LMENTS BYINVESTMEHT AREA (Jan.-Oec. 1968)

] I =....................................... : .............................. )A. Primary ). Fuels I Non-Fuels : Live Animals I.. neat, preparations I Dairy products, birds eggs I Fish, preparations Cereals, preparations Vegetables and Fruits : Sugar, preparations : Coffee, Lea, cocoa| spices I Feeding staff for animals : Hist. Edible Products| Preparations ) Beverages : Fertilizers/Minerals Animals, VegetableOils andFats Processed ) Hoodand HoodProducts ) PaperandPaperProducts

ALF IbLF ............................ _........ ) No. Value No. Value ) (P M) (P M) I - ............ _......................... I .... 134

22B.56e

I I

143 7 15 165 5

18g,44fl 2.131 62.258 213.894 1.688

I.

6

3.85?

1

8.69g

_S. Manufactured Labor Intensive (LI) Hon-Hetallic Hineral Products Furniture and Parts Footwear, Apparel, Barments Misc,Hanufactures Moderately Capital and Skill Intensive (MCSI) LeatherandLeatherManufactures RubberandRubberManufactures Ironand.Steel Electrical _ndNon-Electrical Machineries Transport Equipment HJglyCapitalandSkillIntensive (HCSI) Chemical materials, products NotElsewhere Classified

73

126.562

83 1

216.752 6.866

42 14

116,624 93,U6

27 35

44.897 69.181

136 41

274.453 58.191

9 13 55 13 II

29.856 72,968 179.595 46.966 36.366

39

127.764

43

56.258

_lce_il!ing, F_edwilling, Marketing Facilities, Transport_ _rint£nglPublishing| Other Services) _;mm

Total

Sources: UnpubI£shed _LF andIbLF Reports (February 1989)

_49

mm;_m;mie

799_716

..............

556

1499,886


149 In

its

first two years

1988, hoover, boasts

it realized

of a 100 percent

(b)

Industrial

The

IGLF

between

is

the

collection

and Loan Fund

government •needs

regardless

losses.

In

Up to the present,

ALF

rate.

(IGLF)

a •revolving fund established

financing

enterprises,

ALF incurred Isome

a net income of _43.5M.

Guarantee

the Philippine

meeting

of operation,

in 1952

and the United of

cottage,

of whether

States

a_all,

by

an

agreement

for the purpose and

they are producing

median

for Ithe

of

scale

export I or

16__/ domestic

market.

The fund is administered

The USAID was V.8).

ISince

years,

the

declining last

share from

that IGLF would

the period

($100M), •IBRD

(_40M).

Thus,

Cottage,

s_all, and medium

1989 to 1991.

scale

remainIa

enterprises

IGLF has three main programs,

(2) refinancing popular

and guarantee; among banks.

additional

to

portion

of

the been

started

support

Development source

had

which

$32iM

A major

it

its would

•Assistance

of funds

for

the I

in the future.

namely:

and I(3) straight In fact

Over

counterpart

require

major

(see Table

funds.

The new program

($60M), and ASEAN-Japan

IGLF will

Hank.

to the Fund.

government's

to i5 percent.

1989 projected

Program

least

contributor

of the Philippine

40 percent

during

come from ADB

The

themajor

1975, IBRD has been Iproviding

January

activities

initially

by the Central

(i) straight guarantee.

there are no

takers

refinancing;

The last is the in

this

progra_

16__/ Cottage industries refer to enterprises excluding agriculture whose total • assets are over _50,000 but not more than )_500,000 before financing. Small industries refer to enterprises excluding agriculture whose Itotal assets are over _500,000 but not more than _5M before financing. Medium industries refer to enterprises excluding agriculture whose total assets are over pSM but not more than _20M before financing.


150

IGLF

Table V.8 SOURCES OF FUNDS

Foreign Counterpart Amount (_M)

Government Counterpart %

_mount (PM)

Total %

Amount (_M)

Original: USAID

(1956)

13.04

USAID

(1957)

14.99

USAID

(1964)

1.00

Sub-Total

13.04 19.00

33.99 i._0

29.03

6_%

19.00

40%

48.03

â&#x20AC;˘88.96

75%

3b.00

25%

118.96

Additional: IBRD

1120

PH

(1975)

IBRD

1727

PH

(1979)

189.89

78%

55.00

22%

244.89

IBRD

2169

PH

(1982)

979.9i

85%

171.0_

15%

i15_.92

Source:

Magno

(1988).


ISI since

1973.

required

to

calling

The main reason exhaust

on the

all possible

IGLF guarantee.

Thus, banks have now opted

Loans

obtained

(with a maximum period)

maturity

program

In

March

cottage,

period

it should

developments

should

rate that the Central

is based on the average or

more

during

applied,

if the variable

Banks borrowers charged

may

charge

located a rate

encourages located

the preceding

in

in underdeveloped

areas

IGLF loans to participating 1989 is presented

rate to areas

in Table V.9.

IGLF

of export-

packing

most

to IGLF loans

with maturities

credit, credit

important

to banks

of two

years

interest

rate

is

with maturities

of up

to

end-user

borrowers.

of the country

points

of the country. banks

the

for production

if the fixed

to do it by differentiating

various

period of

rate is applied.

that is two percentage

banks

Bank charges

rate of time deposits

the market

grace

inclusive

in

requirements

while

capital

is concerned.

six months

interest

of 12 years

is one of the

rate of time deposits

or on the average

six months

financing

year.

of two years

For export

180 days, This

working

to include

capital

enterprises.

360 days,

before

than a

(with a maturity

was made

working

not exceed

not exceed

inclusive

and for production

of snort-term

first

borrowers

takes more

(with a maximum

1987, a decision

as far as export

The interest

from

are

program.

of seven years

small and medium

the loan maturities loans,

to collect

And this normally

of fixed assets

the financing

oriented

means

banks

from IGLF may be used for permanent

acquisition

year).

in case of default,

for the first

of three years grace period), one

is that

below

are supposed

the market

its lending

The lending

for the period

However,

rate

23 January

to be

rate.

rate

to

IGLF banks

structure

of

1989 to 30 June


152

Table V.9 INTEREST RATES ON IGLF AVAILMENTS OF PARTICIPATING FINANCIAL INSTITUTIONS (For

the

period

23

January

to

30

June

1989)

Interest Rate Per Annum (%) Location

National

Capital

of

Project

Region

(NCR)

Fixed

Variable

14.1

12.1

Region

I

12.1

10.1

Region

II

12.1

i_.i

ii.i

9.1

14.1

12.1

14.1

12.1

ii.i

9.1

13.1

ii.i

14.1

12.1

Cordillera

Autonomous

Region

III

Region

IV

Region

V

Region

VI

Region

Region

(CAR)

(except Quezon, Aurora, Romblon, Marinduque, Palawan, and Mindoro)

(except Capiz)

VII

Antique,

Aklan

(except Bohol, and Siqui3or)

Negros

and

Oriental

Region

VIII

ii.i

9.1

Region

IX

ii.i

9.1

Region

X

Region

XI

13.1

ii.i

Region

XII

12.1

19.1

12.1

10.1

ii.i

9.1

13.1

ii.i

Quezon,

(except

Palawan,

Camiguin)

Capiz

and

Bohol, Antique, Siquijor, Rombolon, Marinduque, Negros

Source:

CB

13.1

Aklan

Mindoro, Aurora, and Camiguin

Oriental

Circular

No.

89-01

(January

1989).

Ii.i


153 Unlike

the

ALF

ceilings

depending

cottage,

small,

loans,

IGLF loans

are

subjected

on the size of the firm concerned.

and mediumscaleenterprises

to

predetermined

The loan ceiling

are _.4M,

_4,0M,

and

for

_16.0M,

respectively.

In

1988,

Table V.7).

IGL_" granted

The predominantly

non-metallic

mineral

miscellaneous and

••

has increased half

remarkable

and leather products,•• and

parts,

electrical

the

IGLF • will

small

and medium

source of funds

to export-oriented

the

total

future.

history

of bad ••repa_n_entrates.

17 percent •of principal

of principal

performance

and

financing,

to about •57 percent

percent

furniture

footwear,

the new •emphasis •on export

in the near

a

•(i.e.,

(see

of

a very important

a

With

to only

garments,

_1,499M

32 percent

become

amounted

leather

industries

at

about

granted.

IGLF •-has

apparel,

machineries)•received

loans

enterprises

of 577 loans valued

export,oriented

products,

manufactures,

non-electrical

••

a total

In

and interest

in 1986.

and interest

1978,

collections

falling

In 1988, however,

due. only two

falling due are past

of the IGLF in the most recent years

This

due.

and The

augurs

_ii

for

for

1988

are

which

was

its future.

IGLF

realized

not yet available

(C)

Export

Unlike launched

in

Technology institution,

the

a net income of _48.1M

Figures

at this time.

Industry Modernization

ALF

Program

and IGLF, EIMP is a

198_ solely•for•export-oriented Livelihood EIMP

in 1987.

Resource

is designed

Center

to meet

(EIMP)

financing

facility

industries.

(TLRC), a

government

Managed

by

the

non-financial

the needs of non-traditional

export-


154 oriented

industries

technologies market.

and

The

Economic

funds

maximum

maturity

Fund

came from the 짜5B

soft

production

in

loan

the

from

export Overseas

(OECF) of Japan.

loanable

amount

per borrower

The interest

substantially

of their facilities,

so that they can be competitive

mainly

of 10 years. is

percent

services

Cooperation

The

which

for the modernization

below

rate

is

is fixed

the market

rate.

_SM

with

at 10 percent

The service

a

maximt_

per

annum

is

three

fee

of the total amount of the loan.

To

qualify

under

the

program,

the

following

conditions

must

be

satisfied:

i)

The project percent with

must

be resource-based,

for export after EIMP

second

assistance),

substantial

labor through

2)

Assets

3)

There should

year of expansion

labor-intensive linkage

be modernization

_ust

generate

industries; and

in the project

improvement

50

or establishnent

EIMP assistance;

input

cost reduction,

(preferably

or

with other

must not exceed _20M after

to production

export-oriented

which will

in quality

or

lead

expansion

of capacity.

This

facility

contractors their

provided

output

financial Development

at

also

institution,

available

indirect

loans are released

through

Since and

or

50 percent TLRC is a

collected

by

subof nonthe

(DBP).

1988, TLRC granted Ten percent

exporters

that at least

by the final exporter.

Bank of the Philippines

_400M.

to

that they can show proof

will be exported

As of December valued

is

a total of 140 loans under

of it was availed

of

by

the

EIMP

sub-contractors.


155 Most

of

gifts

the loans went

and

houseware

sectors.

percent

of the borrowers

Region.

Loan collection

are re-lent

to the garments,

The average

are located

food

loan size was

in Region

is estimated

to new clients.

furniture,

processing _;3M.

and

About

IV and the National

Capital

to run to _4M to _5M per month

The estimated

default

60

which

rate is alarmingly

high

at 18 percent.

The MSB assistance present,

TLRC

is

from the OECF has already

negotiating

with

been fully disbursed.

O_IF for another

짜5B

to

At

augment

its

resources.

(d)

EDAP

Export

is

Development

another

Assistance

project

capital

to export-oriented

capital

to help exporters

Project

of TLRC.

enterprises, fulfill

(EDAP)

While

EIMP

is

open

producing

non-traditional

The maximum one L/Cs

year

their

contracts

fourth of of

export

loan amount

comes

first

rate is 12 percent one percent

application,

unavailed

both direct

and

and/or

portion

a

per borrower

per annum

exporters

is _2 M with a maturity or expiry

The

who

are

applied

fee of one-fourth

date

fee equivalent

of

one

percent five

of

assigned The

to

for to be paid upon

line, and a one time fee of

per annum based on the availments/drawdown.

of

period

line accommodation.

with a filing

of the 10an amount

of the credit

of credit.

by the government.

indirect

in the case of credit

co_nitment

letters

working

commodities.

for term loans, or upon negotiation

whichever

interest

to serve

long-term

EDAP grants only short-term

it was set up in 1987 with a _20M fund contributed facility

provides

onefiling

on

the

percent


156 To ratio

qualify of

not more

outstanding

loan

project's

cash

payment

of

minimum all

took

1988,

set

not

positive

be

credit

cash

be satisfactorily

December

in contact

in fulfilling

It is the latest in providing

The

facility

export

materials,

wor_ing

small and medium

and other

in

to

must comply

must

have

a

a

with firm,

and

So, in

and

export

that

joined

and

medium

small

from PITC's

April

medium

agency

loan to

exporters, medium-scale

and orders.

government

costs

resources.

the

As

acquisition

of servicing

export

assets do not exceed

above,

t_is facility

The only security

to PITC wit/1 bank's

producer

are being

of orders

of

raw of

_20M.

Unlike

does not

require

requirements

conforme,

Since only those who have valid

favor of the export

Producers

and indirect small

finance

whose

discussed

being assigned

of the borrower.

with

stood at _375M.

to put up hard collateral.

proceeds

after

profitable

for small

capital

entirely

tapped

capital

schemes

facility

short-term

export producers

the four financing borrowers

be

by

contracts

non-financial

total assets

may

with direct

encountered

'I_e _IOM was sourced 1987, PITC's

worthy;

balances

and project and

have any

market.

up a _IOM financing

bandwagon

opened

show

beneficiary

must

and must

and regulations

note of the difficulty

producers it

note

rules

been constantly

exporters.

L/C

program

rate of return of 18 percent;

government

producers. the

due and must

the borrower

to

Philippine International Trading Corporation (PITC) Financing Facility for Small and Medium Scale Export

Having

export

must have a loan

one;

stat_nent must

and reliable

(e)

to

in any KKK lending flow

internal

determined

than _50,000

obligation

existing

PITC

for a loan, the project

and

promissory

and operative

accommodated,

are:

L/Cs

indirect


157

exporters

who

beneficiaries

Loan

evaluation

of

from final exporters

of the L/C, do not have access

takes three days is

closely

minimum

order

application s are processed

normally

have

may have purchase

to approve

by the PITC Special

period

of one year.

of the

The maximum

which

is

based

National

Bank

or

Land Bank,

preceding

weeK.

per

annum.

export

on the prime

loan amount

The current

prime

Loans are supposed

L/C or upon maturity

Unit.

It

However,

is lower

the

during

rate of these banks

to be repaid either

date of the promissory

a

percent

interest

by

must

over

is set at 70

charged

prior

who

concerned

A floating

rates

whichever

not

Association

applicant

the L/C value but not to exceed _200,000.

applied

Credit

the loan application.

performance

are

to this facility.

done by BETP/CIT_M/GTEB/ROG/Industry monitored

but

rate

is

Philippine

t3_e immediately

is about upon

18

percent

negotiation

note,

whichever

of

comes

ear Iier.

In

less than one year,

borrowed loans

three times already

granted

December collection

PITC lent to 21 export producers

1988

already stood

reached at

rate. The main

industry

Association

monitors

productio n

from the same about

_4M, while

around F2M. reason

who

So far,

PITC

the

loan

that shipment

whom

The total amount

loans

for this is that the

evaluates

toensure

facility.

some of

outstanding has

a

100

as

of of

percent

BETP/CIT_V_/GTEB/ROG/

application schedules

also

are

met

closely by

the

borrower-exporter.

(f)

Transactional Financing)

Transactional Corporation

Financing

Financing

(LIVECOR).

(formerly called

Purchase

(TF) is a financingprogram

Its main purpose

is to provide

Order

of the short-term

Livelihood financing


158 to

accredited

producers/suppliers

is

being managed

by the Transactional

full-time

staff

officers.

As of December

who

are mostly

financing

purchase

in 1984.

Then

available

to both domestic-

or

indirect

which

has

supplier

provided

of any retail

apply

specialists resources

budgetary

orders

the financing

the capability

for Transactional

Financing

(TIE) composed and

loan

of

ii

collection

stood at _16.5M

all

of

appropriations.

of irrevocable industries,

that they are a

for at least

It

(POs) held by producers/suppliers L/Cs.

direct

a

regular

six months

to put up a collateral. have

to be accredited

is

enterprise

have been

for at least

It

whether

manufacturing

six months;

store/trader/importer

and have

Center

and export-oriented

been operational

to application; who

in 1986, it added

exporters,

loans

through

stores/traders/importers.

Lending

1988, its total

which came from the government

TF started

of retail

prior

All

first

those by

the

LIVECOR-TLC.

TF grants provided used

that it does

solely

other

working

with fixed end

financing

capital

interest

The maximum

two percent

collateral

of

labor

and/or

six

months

TF charges

a front

loan maturity

of the amount

Also,

of the loan

within

of POs or L/Cs

The loan should be

payment

per annum.

Loans can be released

if all papers

requires

of raw materials,

purposes.

or

of the total value

)_750,000 per borrower.

rate of 14 percent

is higher.

the application

TF

not exceed

for the purchase

fee of _1,0_0

whichever

up to 80 percent

ten days

is

applied after

for,

filing of

are in order.

in the form

personal

properties

and chattel

mortgage.

surrender

all pertinent

loan documents,

with bank

certification

in the case of L/Cs.

of

unencumbered

Moreover,

real

estate,

it asks borrowers

such as POs and deed of

to

assignment

For POs, TF directly

collects


159 repayment

from

collects of

PO issuers

upon delivery

from the bank upon negotiation

the

TF

w_erein

facility

the latter

GFSME Guaranty

of the L/Cs.

is that it enters

graduates

Facility

after

of the goods;

into a

to another

for

L/Cs,

One special

contract

facility

three years,

and

which

with

it

feature

a

borro_r

is called

LIVE_X)R-

or if not to a regular

facility

of banks.

The number

total

value of loans granted

of clients

graduated

already

special TF'S

reached

backed

loans.

up by POs.

anymore 13.3

â&#x20AC;˘loans amount

multiple

defaulted.

Two

their

percent.

considered

All reason directly located

while

to _I5M.

Ninety

of

irrevocable In

L/Cs.

addition,

Accordingly,

others do

not

These come from

(90) percent

them defaulted

was

The

some of

them

r__cd At

15

who

loans

are

did

past

of

not

rate of TF

which are

present,

loan value

the i,aporters

â&#x20AC;˘Thus, the default

anymore

clients

of the outstanding

with a total

because

four loans

_75M.

become bankable.

So far, three borrowers

_2M honor

stands

due

are

at

being

for restructuring.

of TF's borrowers for limiting collects nearby.

to Metro

the loan from issuers

It hopes

discounting

to expand

in Metro Manila.

Manila

borrowers

export-oriented

should

be

in the future so that

it

of

post-dated

enterprises, checks

similar

is

main it

of POs and banks

its resources

The that

in Cebu City and Davao City which

small and medium-size

operation

have their offices

itself only

can open up branches of

program,

since they have already

outstanding

obtained

a peak of 90 in 1987.

to another

assistance

from 1984 to 1988

who

have a large and include to

what

number in PCIB

its is

17/ currently

doing

17__/ See arrangement.

in the Marikina

Lamberte

and Jose

Shoe Industry.

(1988) for a detailed

discussion

of

this


160

(g)

APEX Re-Financing

The APEX Financing for

long-term

the

Central

is open

loan

Bank

Apex

used

buildings,

expansion equity

ranging

meritorious

the

and other

projects.

APEX

it is also available

these projects

have

private in

sector

foreign

resources

cost

locally

must show

and

fundsmust

criteria

imported

goods;

works with direct •or indirect for an APEX

exchange

such

as of

(PFI).

loan ranges

the

In

some

purposes•.

although

by the government

assuming

sector

advantage

projects

optimal

these

from

the

use

of

local

to the program.

(a) 100 percent

(b) 70 percent of locally

exchange

or if

in order tO compete

manner:

component;

foreign

between

industries

the private

(c) 50 percent

civil

period

foreign

upon

On the other hand,

imported;

direct

APEx

for purlooses

capital

for its eligibility

with

disbursement

or indirect

either

and should make

is directly

of an

assets

domestic

be spent in the following

if'the goods

procured

for working

comparative

markets,

export

institution

for projects

impact.

preferably

funds may also be used to finance

linkages with

inherent

domestic

as the primary

APEX the

extensive

program

of capital

for private

to some extent

by

the

The proceeds

equipment

the need

Managed

(CB-ADFU),

enterprises

financial

it may also be used

development

Unit

arrang_m_ent must be agreed

The funds are intended mainly

have substantial

Finance

industrial

participating

cases,

in the country.

the acquisition

machineries,

This

in 198_ to address

from [_4M to @100M.

to finance

investments. and

industries

Development

or for start-up

borrower

was established

and large-scale

with assets

can• be

factory

PrDgram

financing •of viaDle

to medi_

generating

Program

and

of the cost produced

if

goods

(d) 45 percent

component.

of

of

The normal

from one to two years.


161 Just program

like

the

intended

refinancing

to replenish

lent

to eligible

to

participating

individual

other

industrial

to

projects.

purpose

is

a

project

mainly

equipment.

for

Actual

equivalent

of the

exchange

rate.

foreign

exchange

The from by

repayments

program's lending

system,

percent option

WB

single

these funds

fund

program's

is

loanable repayable

mixed

turn

make

marKet-determined

rate

underlines

machineries

generally

made

in

of the CB's existing

its

and

other

the

peso-

peso-dollar the

only

lending

which

of foreign

was funded by a

led

in 1981 with a WB fund of $150M

and

of $100M.

Due to the

by the CB-ADFU

nature

to PFIs through

the refinancing funds.

commercial

loan

of a

the

mixed-

is done with a mix of 60

However,

the

PFI

has

the

in any mix it wants.

amount

under

the APEX I program

for 15 to as long as 20 years

life of the assets

good

in

banks

consortium

is given on the principal. loan

which

loan • which

was APF_I

I started

I was relent

to relend

on the economic years

APEX

40 percent

borrower

institutions

normally •the •borrower who will assume

under the system,

maximum

a

imported

(WB) and a consortium

and

The

of

on the basis

counterpart

fund, APEX

relep_ing

for the loan.

of London.

consortium's

at

denominated

first phase of the program

Lloyd's

financial

(PFIs)

are, however,

It is, •therefore, risk

a

by the CB for the funds.

currency

amountdue

is

funds are relent by the CB-ADFU

proponents

the acquisition

the World Bank

the

the

foreign

APEX

institutions

inclusive •of the cost charged

APEX

APEX

funds by participating

financial

subloans

facilities,

to be financed. However

for 12 and a half years.

system,

a two-structured

As

interest

$6M

for

or normally

A grace

the consortium

is

period

banks' a

rate

based

of

portion

result

a

of

four of the

scheme was


182

charged

on

an APEX

percent

on

the

floating

LIBOR

WB component rate

plus

three-fourths

the

loan

to

includes service the

the end-borrower,

charge,

fixed

+ 0.125%)

as service although

plus a reasonable

of the APEX

APEX

I

institution

up

to

on the

to

component

of the APEX

operations.

eventually

spread

be

The cost of essentially the

for the PFI.

CB

Overall,

to the

extent

of the loan.

as of June

I was very slow that briefly for

1988 :.

working

capital

funds by PFIs to the CB is almost very few cases

of delays

with new funds

100

or defaults

for APEX II.

Initially,

in 1984, with

These funds are in turn invested

merged

a

funds

coSt and

largely

9.6

and

consortium

determined,

fluctuated

APEX was open for loans

PFI's encountering

recovery

loan to an end-user

of APEX

spare,

Repayment

re-lending

-

maturity

charge by the CB.

market

had its last loan disbursement

availments

the

reaains

(average of 6 mos.

of one percent

of the consortium's

funds

which

financial

the cost of the funds to the PFI - the interest

cost

loan

loan to a participating

enough

purposes.

percent

with

in their

loan

by the CB which

In

the

interim,

will the

â&#x20AC;˘ -'

program

is not operational

underway. with of

The

with the negotiation

additional

$65M funding

the original

funds of APEX

the Philippines.

However,

loans

under

consorti_n's debt,

APEX

will

counterpart

has already

the program.

I

be

of fresh funds

for APEX

II from the

I will be managed by

the collection undertaken

fund in APEX

been restructured

the

Central

I, a part of the

for re-lending

WB

II

together

the Development

of the remaining by

for APEX

Bank

outstanding Bank.

country's

The foreign

in the second phase

of


4.0

Export

Credit

are

three

There industries, the

namely:

Guarantee

Philippine

guarantee

Fund

and Foreign

facility.

(a)

at

1984.

Kaunlaran

Livelihood A

It is a special

Corporation

representatives

Chart).

Currently,

An

initial

affairs

KKK-PC2%.

At

GFSME Specifically, direct

Center

has it

production

of GFSME

and/or

(KKK-PCA),

now

processing

of

consumption

as well as those projects

which

production,

up to one level of backward

renamed

corporation.

four

government

Managing

C for the Organizational

Support amount

staff.

to about

exclusive

intended

are indirectly

or forward

of

which

Fund and _2M from

are or will be food

sector Director

as seed fund of the GFSME,

which

in

Kabuhayan

All three private

its

loan

operations

to the Kilusan

staff and 16 junior

as

the

(GFSME)

its actual

A full-time

of GFSME

(2)

here.

sector and

(see Annex

agriculture

supportsprojects

(3)

rather than a

is a government-owned

of the Economic

total resources

identified

Authority

bankers.

_302M was allocated

present,

attached

its operations.

GFSME has 16 senior

_300M came from the proceeds

of a financing

1983 and began

(IGLF);

(Philguarantee).

and Mediu_n Enterprises

program

are professional

the day-to-day

Corporation

of three private

oversees

export-oriented

(GFSME); and

not be discussed

(LIVECOR) which

Board composed

representatives manages

in April

(KKK) - Processing

Management

sector

it will

to

and Loan Fund

Enterprises

Loan Guarantee

Fund for Small

GFSME was established

catering

Guarantee

IGLF is more

Hence,

The Guarantee

February

schemes

for Small and Medium

mentioned _above,

guarantee

System

(i) the Industrial

_port

As already

6_arantee

_500M.

market

engaged for

area. in

the

biological

involved

integration

the

or

in food linkage,


184 and

other agri-projects majority of the produce of which is

export.

Thus,

both

export-

and

beneficiaries of the G_'SMEprogram. food

and

domestic-oriented

intended

industries

can

for be

GFSME intends to give more emphasis on

non-food agricultural processing during the period

1989

-

92.

Export-oriented projects will be given high priority.

GFSME

principally operates through a network of accredited

financial

institutions composed of commercial, development, rural, and thrift To encourage banks to lend to small and medium enterprises, GFSME

banks.

operates

the following regular subsystems:

(i) risks

Guarantee Subsystem.

of

agricultural

This is

designed to

mitigate

sector lending by providing lending

perceived

banks

an

85

percent guarantee cover on all types of credit risks.

(2)

Interest Rate Subsidy Subsys+tem.

Under

this

subsystem,

absorbs

the interest rate variabilities in the credit market

ensures

viability of the loan portfolio carried by participating banks

all

times.

This subsystem is now being phased odt in

and

GFSME

favor

of

thereby at

market-

determined interest rate facility.

(3) Liquidity subsystem. with

a

This subsystem provides participating banks

matched

rediscount facility for loan originations under the program maturity

basis.

There is a plan to eliminate this

on

subsystem

a so

that GFSME can concentrate more on its guarantee mechanim,.

(4) Recycling or Mortgage Subsystem. secondary

This is

designed to provide

market for GFSME guaranteed loans and tap available

external to GFSME.

This subsystemwill

a

liquidities

be further developed in the future.


165 As

already

enterprises

mentioned

earlier, both

export-

can qualify for the GFSME Program.

and

domestic-oriented

However, the project

must

qualify under the following minimu_ criteria:

(i) The project mustbe

small-scale (i.e., those projects with assets

of not less than p82,500 but not more than p2.5M after financing) or

medium-scale (i.e., those projects with assets of

more

than

p2.5M but not exceeding _IOM after refinancing); (ii) The project must have a projected rate of return on investment of at (iii)

The project must have a firm, determined and reliable market; and

(iv)

The proponent must have proven managerial capability.

The fixed

least 20 percent per annum;

GFSME Program accommodates loans intended for the acquisition

assets with a maximum maturity period of 10 years inclusive

two-year period

grace

of

period

and for working capital with

five years inclusive of the one-year grace

a

maximum

period.

of

of the

maturity The

loan

ceiling is _2M for the small scale enterprise and p8M for the medium scale. All

loans should be collateralized.

reviews

The Management Board

the interest rate every quarter.

determines

The prevailing interest rate

and on

loans under the GFSME Program is more or less the same as the market rate.

Aside fee

from the interest rate, the borrower has to pay an

which is fixed at three percent of the principal loan

upon

origination

amount

payable

loan approval, a guarantee fee which is two percent per annum of

the

guaranteed portion of outstanding loan amount, documentary stamps and other registration fee, and other charges that may be charged by the banks.

originating


168 A

default

monthly

occurs

amortizations

applicable

fees.

pay the unpaid may

in case the borrower or

The mortgages

balance

bank's

GFSME

notice.

facilities

from

the

regular

Guarantee

liquidity

(ii)

Farm

(iii)

With

Loan Program

non-agricultural

stood

at

commercial

23, down

created

facility

fund

(CALF) from the

interest

loan amount

Line

is

Facility. lines

funded of

much

the

regular

subsidy

Facility.

This

extended

and

higher,

facility

by accredited

dealers.

This

is

an

extension

livelihood

it can be said that GFSME

development

newly

and _2M for single borrowers).

has also

of

projects. its foot on

activities.

of accredited

from a high of 39 in 1985.

and private

once

is a _100M

for non-agricultural

1989, the n_ber

loan documents

are:

to farm machinery

economic

the the

is different

to discount

Guarantee

this program,

of February

Discount

cover

institutions

LIVECOR-GFSME LIV_COR's

It

to

for collection.

Loan

and, the maximum

Dealer

guarantee

financial

Agricultural

for group borrowers

Machinery

provides

These

This

institution

receiving

three

since it does not have an

support

(i.e., _20M

above,

Facility.

of Agriculture.

Program

after

all

fails to

a letter of demand

the defaultees

by GFSME.

including

The lending

30 days

facilities

Comprehensive

Department GFSME

fees.

sending

consecutive

if the borrower

all the pertinent

it can run after

the

CALF-GFSME by

As

10 days after

are now being offered

(i)

amortization,

acts on the claim within

claims,

to pay three

will be foreclosed

Since GFSME possesses

it pays bank's

Aside

quarterly

and other applicable

call on the guarantee

defaultee.

one

fails

banks

The

financial number

substantially

institutions of

declined,

accredited but

was


167

partially Total

offset

number

by

the rise in the number of

of projects

approved

value of )_620M (see Table V.10). percent

of the projects

Loans are heavily

Table

V.II

accounts. fish

shows

these

were

export-oriented

used

The

sector.

for prawn

industry.

such as coffee

substantial

and cacao,

the

recover net

past

(i.e., accounts at 9.9 percent date. has

promptly

other

banks

About

42

enterprises.

GFSME

acti_ went

is

a

GFSME

balance

28,

1989

was able to Thus, rate

definition)

stood

of all accounts

within

provides

default

by collateral.

in their claims

export

_6.6M.

the

to GFSME's

of

industries.

amounting •to while

the

all

non-traditional

So far, GFSME

according

to

non-traditional

40 as of February

its•exposure

loan

that almost

export-oriented

reached

of the total outstanding

loan

the

as of

So far,

that GFSME

stipulated

time

from 1984 to

1987.

earlier.

Table

V.13 presents

Note

that income derived

been

enough

rely more

which

due rate posted •at 10.25 percent,

paid

of

it can be said that

All past due loans are fully• covered

mentioned

its

production

which are in default

is _I.SM.

of active accounts

(see Table V.12).

from five accounts

aggregate

scale

It is to•be noted

of past due accounts

banks.

III, IV, and VI•.

support• to the non-traditional

number

of the small

distribution

then

rural

an

loan size

If we also consider

with a total value of _38.7M fully

in Regions

About half of the total amount

loans

crops,

are those

the sectoral

and fish preparations

is 346 with

The average

approved

concentrated

to date

accredited

from the guarantee

to cover general

on income

liquidity

the income statement

and origination

and administrative

from its investments

subsystem.

of GFSME

expenses.

in government

One large operating

expense

fees GFSME

securities item

is

has has and

not to from

interest


168

OPERATING (As of

Table V.10 HIGHLIGHTS, February,

GFSME 1989)

Items

Total

loans

Figures

approved

Number Amount Average

(_M) Loan

Size

346.0 619.7 1.8

(_M)

z/ Inactive

accounts

Number Amount Active

99 214.9

(%_M)

accounts Number Amount

Loans

247.0 404.7

(_M)

Released Number Amount (_M) Outstanding Balance (_M) Total Contingent Liability

Taken

Out

(Net

Number Amount

of

Repurchases) 43 83.8

(_M)

Purchased/Repurchased Number Amount

(_M)

228 378.8 316.7 191.1

by

Banks 10 24.6

(_M)

i/ Accounts guarantee withdrawn Source:

GFSME

means either of the following: revoked, prepaid, fully paid, or acquired. Report

(February

1989).


169 Table V.II GFSME LOAN AVAILMENTS BY INVESTMENT (As of February

AREA

1989)

GFSME

No.

A. Primary Fuels Non-Fuels Live Animals Meat, preparations Dairy products, birds eggs Fish, preparations Cereals, preparations Vegetables and Fruits Sugar, preparations Coffee, tea, cocoa, spices Feeding staff for animals Misc. Edible Products, Preparations Beverages Ferti I izer s/Minera is Animals, Vegetable Oils and Fats Processed wood and Wood Products Paper B.

value (_M)

-

-

78 2 7 117 5 7

107.214 6.050 1.620 205.297 5.725 20.045

8 7 ii

15.710 14.800 19.442

1

8,000

4

8.035

247

404. 718

and Paper Products

Manufactured Labor Intensive (LI) Non-Metallic Mineral Products Furniture and Parts Footwear, Apparel, Garments Misc. Manufactures Moderately Capital and Skill Intensive (MCSI) Leather and Leather Manufactures Rubber and Rubber Manufactures Iron and Steel Electrical and Non-Electrical Machineries Transport Equipment Higly Capital and Skill Intensive Chemical materials, products

(HCSI)

Not Elsewhere Classified (Ricemilling, Feedwilling, Marketing Facilities, Transport, Printing/Publishing, Other Services) Total

Sources:

Unpublished

ALF and IGLFReports

(February 1989)


170

Table

V.12

PAST DUE ACCOUNTS, GFSME (As of February 28, L989)

Type

Number

Value

., i.

Accounts payment

with

2.

Accounts guarantee

3.

Accouclts a)

b)

delayed

(_0_) 8

637.5

wit_] unpaid fee

16

309.6

witil legal

iI

31,095.8

7

28,880.3

Accounts wit_l on-going negotiations Accounts

under ,,:.

foreclosure 4.

Acquired Net

4

assets Past

(Recoveries)

Due

35

---_

Source:

5

10,215.5 ,.

6,650.0 32,042.1 jo:

GFSME

Unpublished

Report


171

Table V.13 STATEMENT, GFSME Million Pesos)

INCOME (In

0 1984

1985

1986

1987

REVENUES Interest

on:

Investment securities Notes

in

government

receivable

6b.4

87.7

55.8

36.8

-

6.2

5.0

10,2

0.i

_.9

i.i

0.7

0.1

0.6

3.0

4.4

0.1

1.4

2.0

2.6

66.7

96.8

66.9

54.7

-

2.3

7.2

2.4

6.2

3.9

purchased Others Guarantee

fee

Origination

fee

TOTAL EXPENSES Operating: Interest

subsidy

Provision losses

for

probable -

Others General

& Administrative

TOTAL NET

INCOME

Sources:

GFSME

Annual

Reports

(various

-

-

0.9

0.7

0.5

4.1

6.7

8.4

9.6

4.1

9.9

22.5

16.4

62.6

86.8

44.4

38.2

years).


172 subsidy. total is

It

rose to _7.2M

expenses.

therefore

profits.

GFSME's a

step

Another

which

practically

Thus,

without

funds,

the

danger, will

likely

(b)

plan to phase

in the right

large expense

viability

raise

is

virtue

of Presidential

decree

creating

Decree

No. 1080

the Philippine

Foreign

authorized

capital

stock of pIOB.

of

September

1988,

It is functionally

The

Board

representatives the Central

and

president.

1988

Department

Philippine

Development

time

Directors

from the Department

Bank,

Philippines,

of

Authority.

composed

of Finance

Presently,

It has full-time

(see Annex D for the Organizational

The primary

, (a)

To

functions

promote

country

for

development

move

in that

enterprises.

Corporation

in

revised

1977

an earlier

stood

the

It

has

at p3B

Department

seven

by

as of

and one representative

from

Development

Bank of the

Board, and National

complement

is headed of 70 as

Economic

by a of

part-

December

Chart).

of Philguarantee

and facilitate

be

two

Philguarantee

staff

these

members:

and Industry,

Construction

fees.

Corporation.

to of

losses

of

fee, a

capital

attached

operating

will

created

essentially

The Paid-in

is

of Trade

Overseas

corporation

Loan Guarantee

an

Finance.

institution

Loan Guarantee

which

its

manag_nent

to small and medium

a government-owned

the

subsystem

for probable

its guarantee

The Philippine Export and Foreign (Philguarantee)

subsidy

of

and origination

funds and prudent

increases

one-third

improve

from guarantee

of GFSME as a guarantee

the cost of funds

Philguarantee

to

item is the provision

investible

it substantially

about

out the interest

direction

eats up the income

the large

unless

in 1986, representing

are as follows:

the entry of foreign

purposes

having

special

loans regard

into

the

to

the


173 needs the

of export-oriented industries, industries registered Board of Investments, public utilities, and

with

industries

t_e

promotion of which is encouraged by government policy;

(b) To

guarantee loans granted by Philippine banking

institutions

to qualified

exporters,

and

producers

financial of

export

products, and contractors with approved service contracts _road;

(c) To

facilitate

and

service contracts

assist in

the

implementation

abroad entered into by with

approved

Philippine

foreign

entities,

enterprises

or

potentials,

by providing counter-guarantees to Philippine

and

corporations

of

exchange

earning banks

financial institutions issuing standby letters of credit

letters

of

guarantee

for

theperformance

of

said

or

service

contracts;

(d) To

meet

requests

corporations

to

from

entities,

them

the

in

enterprises,

coordination

and

of

their

and expansion plans with a view to achieving

better

development

assist

domestic

utilization of their resources; and

(e) To provide technical assistance in the preparation, financing and execution

of

development or expansion programs,

including

the

formulation of specific project proposals.

In

a

nutshell,

exporters sources. qualified for

on

Philguarantee provides

their

guarantee

borrowings whether obtained

coverage from

local

to or

Filipino foreign

Such coverage is designed to demonstrate the creditworthiness exporters and, thus, enhance their ability_ko

their various requirements.

secure

Its services are available

to

of

financing producers


174

and

traders

of

Philippine

exporters

and contractors.

including

a

liquidity

products

for export

Unlike GFSME

facility,

which

Philgu_&ntee

as

well

as

has a number provides

to

of

only

service

facilities a

guarantee

facility.

At

present,

General

Guarantee

Small and Medium

(i) _5M

Philguarantee Facility

However,

For

must

producer

is for guarantee

the approval

trader

indirect exporters

On the other hand,

to overseas

customers;

such pro3ects

international

of more

of the Board

of

than

Directors.

need approval

for a service

under

peso

from

the

loan Obtained

a

by borrowers

construction

contractor

or other

exporter,

be

and improvement

used

to

services

infrastructure and be

registered

contractor. may

export-

Philguarantee' s

_equirement

if a service if

Bank as

in domestic

and that he/she must be

program,

export products

and/or

projects

foreign-funding

Board

this

to

exporter

or, if involved

Construction

and acquis_iDn,

access

in construction

must have

bidding;

Overseas and

to qualify

can have

Bank or to Board of Invesb_ent

expansion.

below.

or the Central

provided

currency

for

with the Board of Investment

be involved

Philippine

Program

non-traditional

he/she must

capital

This

or a trader

qualify,

Central

Guarantee

of

Thus,

assistance.

to

the

These can either be peso or foreign currency

andor

be a producer

and registered

projects,

namely,

guarantees.

export

oriented.

facilities

of _*50M or more per beneficiary

of the Philippines.

denominated

he/she

Facility.

that requires

guarantees

President

These are discussed

Guarantee

per beneficiary

two major

and the Export Credit

Industries.

General

offers

open

with

the

or with

the

The

foreign

for

working

of fixed assets

for


175 Philguarantee the

case

of

provides

export

70 percent

producer

accommodation

value

in

Philguarantee

charges

and trader and

the a

of the loan accommodation

case of

guarantee

80

service

percent

•exporter

fee of 1.5•percent

value

of

and

per

the

in loan

contractor.

annum

of

the

amount •guaranteed.

(2)

Export Credit O_/arantee Program Industries (ECGP-SMI)

This the

is for guarantees

Board.

President approve

The of

Philguarantee

Association

of

medium-size

exporter

The

maximum

the

approved

assets

are authorized

was• designed

the Philippines.

•and

by the Board

lacking

guarantee

facility.

are those who have assets

collaboration

sufficient

coverage

of at least _50_,000

in

It would enable

revolving •credit

credit

President

approval

from

Executive

of

Vice-

Directors

to

this facility.

facility

and post-shipment

and Medium

of _5M or less that do not n_

•Chairman of the Board,

loans under

This

for Small

provided

Bankers

small-

to obtain

exporters are

but less than _5M, while

and

_)re-shii_ment

from any participating

by Philguarantee

Small-size

the

an eligible

collateral

facilities

with

bank.

is 70 percent those

which

medium-size

of have

exporters

of at least _5M but less than _20M. %

To qualify processing, products;

for the •ECGP-SMI facility,

production must

or

trading

of

have a •t/_ree-year track

record;

margin

of

average

current

ratio of 1.5:1, and an average

themselves

incr_nent)

of 75:5.

of such facility.

average

_riority

profit

valuation

10 percent,

borrowers •must

Both direct

non-traditional

and must

return on debt

be engaged

equity

have of

to equity

an

export average

15

percent,

ratio

and indirect exporters

in the

(net of

can avail


176

Under the BZGP-SMI fee to

of 1.5 percent the

issuance

of the guarantee

of the

filing

of

between

Philguarantee

All

the

credit

in

investigation. participating

some

cases

Thus,

all

However, interests

borrower

for

borrower

is

Agreement

with

the

it

days

required Negative

equally

own for

separate

on

to

already

be do for

case-by-case

assessment

and

submitted

by

by Philguarantee.

share

of

a

guarantee

collaterals

under

in favor

banks

credit

approved

are

from the exporter-

on

all banks

guarantee. Philguarantee

collaterals, against

the

The

exporter-

an

Indemnity

Pledge.

program,

later than the expiry

claims

for guarantees

may be submitted

No claims will be honored

date of the guarantee.

if

submitted

All claims

will be

by 15 paid

30 days.

Philguarantee in

its

applications

to execute

one upon

the application

the application

conducts

accommodation

at the time of default.

within

endorsing

has a proportionate

credit

shared

facility

and claims held by the participating

Under the BCGP-SMI banks

reviews

does not require

of

payable

be

participating

before

banks are not automatically

Philguarantee borrower.

still

to

and guarantee

Although

proc_ure

one-fifth

prior

bank.

credit

banks.

Philguarantee

and

rights,

a

guarantee

payable

of _1,_0

application,

and the lending

for

a minimum

accommodation

with a minimum

and guarantee

loan processing

guarantee,

charges

and a filing fee of

accommodation

to participating

normal

basis,

granted

applications

submitted

Philguarantee

per annum of the guarantee

percent

the

facility,

Middle

currency.

East

has had a poor performance construction

contracts

About _5.5B non-performing

record mainly

which

assets

it

due to failures

guaranteed

of Philguarantee

in are

foreign supposed


177

to

be transferred

to the national

No. 64, but as of September Philguarantee September the to

1988 alone,

interest _174M.

sustain

Facility

The government

related

Government

In

it lost _165M

and financial

view

(see Annex

has been providing

totalled

of

its

inactive

it provided

_unication

system

is mainly

for

assets

to

due

to

amounting

to Philguarantee

1988, advances assets

losses,

has been essentially

creditworthy

advances

January

from

to

the

National

to

National

transfer

_489M.

heavy

exceptionally

E). This

Order

AS a result,

For the period

on the non-performing

As of September

the $40M guarantee

active.

charges

losses.

to the non-performing

already

by virtue of Executive

this has not yet been done.

to suffer huge

its operation.

Treasury

was

continues

1988,

government

and

Philguarantee's today.

One highly

that

it

serves

a

Hoover,

that follows

Guarantee

exceptional

to PLDT in 1987 because

in the Philippines.

Thus, the discussion

General

the company

vital the

case

role

in

ECGP-SMI

is the

r_mlains

will focus on the performance

of

this program.

Between

1980

and

amounted

to

declined

thereafter

crisis. cancelled high

_335.8M

of _80.4

guarantee

(see Table

V.14).

as

As of December guarantees

1988,

the economy

in 1982.

The number

substantially

from

_GP-SMI

1987 resulted

issuances sector,

in in

83 in 1982 to 17

It reached

went

1988, outstanding

and guarantees

issuances

through guarantees

in default

only in a small

to

recover.

a peak a

in

II:GP-SMI 1982,

net of

The effort improvement

One of the reasons

but

balance-of-payments re-availments,

outstanding

1987 and 1988 even as the economy,

started

the

were only _38.4M down

of accounts in 1988.

under

also

from a

declined

to revitalize in

the

particularly is that

the

the

guarantee the

export

number

of


178

CO O_l

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('_

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("3

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179 active

banks

V.15),

considerably

not to mention

new progrma. _CGP-SMI Banks

indicated

those

the fact that

The other

as earlier

declined

reason

discussed

went

are _ch

so

(see

all of them need time to adjust

more

that firms that satisfy

Philguarantee

the last few years

is that the eligibility

that do not need anymore

that

during

rigorous

the newly

assistance

criteria

to

the

of the

new

than the previous

revised

to

one.

requirements

from Philguarantee.

far in an effort

Table

reduce

are

It calls

seems on

its

of

the

guarantees.

Classified guarantee

issuances

This reflects share

of

catching credit

up fast especialiy

TaDle

1984, guarantee V.17).

From

in

among

banks,

total

as shown

(see

Table

financing. guarantee

in the last two years.

issuances

went

1985 onwards,

concentrated

the period

9.2 percent

occurred

distribution were

credit

V.16).

However,

the

issuances

is

Post-shipment

export

in the share of guarantee

in

only

to quite a number

however,

three

the

of industries

guarantee

industries,

namely

issuances garments,

and furniture.

During about

export

proportion

going to it.

more

handicrafts

a greater

for short-term

export credit

is still not popular

beca,ne

rates

preference

comprehensive

Before

is

to type of credits,

was for pre-shipment

the banks'

accommodation

(see

according

in

1980 to 1988, _30.9M of the total guarantees

1982

of default

incurred

by

and

1985.

by year would

guarantees

issued

Accordingly,

banks' misconception

high default

rates.

More

in guarantees issued.

However,

in earlier

closer

years largely

only riskier

This

The highest

show that the highest

of the program

specifically,

a

defaulted.

(see

look

default at

default Table

contributed

the rates V.18). to the

loans were endorsed

by


180

ACTUAL

Year

* ** Source:

NUMBER

Active Banks

Table V.15 OF PARTICIPATING

Participating BanKs

BANKS

Ratio

198H

12

27

44

19dl

16

28

57

1982

23

31

74

1983

20

31

64

1984

16

31

52

1985

10

31

32

1986

8

31

26

1987

5*

31"

16

1988

3*

5**

60

Participating banks in the Old ECGP Selected banks in the New ECGP-SMI Philguarantee

Unpublished

Report

(March

1989).


r,_ CO

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183


184

banks

to

them.

the ECGP-SMI,

while

This practically

Philguarantee

negates

responded

reco_nendation

normally

good accounts

the risk-pooling

by tightening

by banks

and monitoring

the relatively

their

to the point

feature

screening

screening

by

_CGP-SMI.

on

the credit

The tighter

kept

of the

process

of duplicating

done by banks.

were

guarantee evaluation

process

and

!

constant

credit

criteria this

monitoring

all helped

has resulted

in attaining in a smaller

leaner

guarantees

losing

the effectiveness

So

far,

percent the

two

The

years

V.19.

and guarantee

_2.6.

Except

net total

for

huge

eligibility

outstanding

and

thus, almost

But

a

much

completely

Improvement

is

equivalent

in recoveries

started

to

of the HCGP-SMI

1980 to 1987,

one year during

to

17.5

was made

directly

take

in the

in its eight

program

is

from

while expenses

totalled

only

years

fund is required

in

derived

a

positive

of its operation.

for the

shown

revenues

that period,

the program

investible

total

to _5.1M,

in all the years

by

which

after defaultees.

income of _6.8M realized

sufficiently

to _5.4M

defaults.

fees amounted

made

stricter

rate in 1987 and 1988.

of accounts

when Philguarantee

by the program

advances

much

net of reavailments,

the period

filing

realized

number

and loss statement

For

a

a zero default

amounted

of running

profit

with

of the ECGP-SMI.

recoveries

responsibility

Table

outstanding

of total guarantee

last

coupled

of operation same

profit

was

However,

the

cannot

period.

cover

Clearly,

for the ECGP-SMI

to be

a

self-

liquidating.

To improve

the effectiveness

introduce

the so-called

designed

to simplify

of ECGP-SMI,

"Bank Guarantee

and facilitate

Philguarantee

Line" program

the delivery

of

is planning

(see Annex F). financial

to

It is

assistance


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185


186 and guarantee of

to deserving

_25M per participating

against The

support

irrevocable

eligibility

existing

financing

available

or

assistance

five _times the

_200M

als0planning

to

is

program

and

in

for overseas

selected

program,

Philguaran_ee

advance

payment

or

proposes

a guarantee

Recently,

truly export

B.

export

assets

credit

section

experience

although

sharingCwi%h

capital

the

for now

for

its

pre-

readily

G).

limited

Under

this

on performance

mobilization

the contractor

a technical

guarantee

in lsomewhat

Annex

guarantee

a Dank and

obtained

guarantee

(see

will Prbvide

its operations_ _ Ir_de_

Experience

This

Contractors,

peso working

Philguarantee

to improve

finance

than

guarantees

liquid

granted

this program.

liberal

re-introduce

types of contracts

proposed

Bank

under

are muc_ more

to issue _IB in

credits

line

for i_s use.

Philguarantee

amount

hopes

a guarantee

export

POs are eligible

for borrowers

Philguarantee

by providing

Only pre-shipment

L/Cs or acceptable

criteria

one.

export

bank.

exporters

expenses.

It

concerned.

assistance

it is gearing

bond,

from the World

itself to become

a

institution.

with Export Financing

is divided of banks,

into two parts. and the second,

The first

discusses

the exporters'

export

experience

with

financing.

i. 0 " Banks

Export system. to

transactions

This

transact

exporters

to

normally

is the most convenient

their report

business.

There

to the Central

pass

through

the

commercial

way for both exporters is a

regulation

Bank both the

that

volume

and

banking importers

requires and

value

all of


187 exports. their

In addition,

exporters

banks all export

closely

monitored

are required

proceeds

denominated

by the Export Department

In 1988, the seven sampleâ&#x20AC;˘banks (see Table V.20).

This

is roughly

to immediately

in foreign

currency.

of the Central

had a total 45 percent

surrender

to

This

is

Bank.

of 2,392 export

customers

of the total number

of active

18/ exporters

in

1987.

Except

for one bank,

only a

small

proportion

of

19__/ their

export

export

customers

transactions

Table V.21). average

in 1988 greatly

The lowest

transaction

The

terms

documentary

credit

only

Table,V.22).

while L/Cs

The

banks

merchandise

fully refinance It

se_s

asked

within and

of

among

was _25,700,

is 60 days

exports

transactions

L/Cs,

individual banks

while

(see

the highest

three banks

sight

draft,

mentioned

L/Cs

advising

only

a_e

The ratio of

and the typical

loans granted

is 0nly about

in that same year. loans with

that banks rely on their the banking

cash,

usance

term

to

of

usance

in 1988 by the seven

sample

(see Table V.23).

of export

their export

are

and confirming.

for most banks,

to _5B, which

how liquid

The size

One of the seven sample banks

As regards

small

total amount

banks amounted of

of export

and L/Cs.

relatively

for most

varies

transaction

the rest are both advising is

L/Cs

average

new ones.

was _5M.

typical

(see

in 1988 were

three percent All, except

the Central

own funds

to a

of the total one bank,

Bank

did

(see Table

certain

value

V.24).

degree.

system at present,

all respondent

figure

1988

not

banks

When said

18/ We available.

are

using

1987

19__/ New customers may include bank with the respondent.

since

the

old exporters

figure

who may have

is

not

just

yet

newly


188 Table NUMBER

BanKs

OF

EXPORT

88 I_73 2_ I19 154 188 666

78 34 15 5 3_ 15 7

3 4 5 6 7

Table

1 2 3 4 5 6 7

1988

% New Export Customers

1

Banks

CUSTOMERS,

No. of Export Customers

2

SIZE

V.20

V.21

OE INDIVIDUAL TRANSACTIONS, 1988: BANKS' RESPONSES (In Pesos)

Average 5,0%9,000 25,7_ 200,00_ 1,894,43% 423,50@ 1,2_0,000 39,500

Minimum 28,888 21,_9_ i_,00_ 12,584 8,278 10,_M0 4,278

Maximum 50,_S 63,27_,_00 I_,_00 II_,00%,_0_ 886,696,168 220,%0_,000 64,0_,0%_


189

TERMS

OF

Taole EXPORT

Banks

1 2 3 4 5 6 7

Note:

Terms

-

1 2 3 4 5

Others:

V.22 TRAHSACTIONS

Terms

1245 12345 24 •234 1234 4 2345

- Cash - Sight Draft - Documentary Credit -•Letter of Credit (L/C) - Others for for for

Bank

1 - Cash against Documents Documents Against Acceptance. •Bank • 2 - Open Account DP, DA Bank 7 - Prepaid Exports Documents against Payments

TaDle V.23 LETTERS OF CREDIT

Banks

1 2 3 4 5 6 7

.... _

Letters of Credit ______ ___ _. a .. - ...... ......_ _ _.-_..- .......... . . . Terms of Usance Ratio of Usance (Days) to L/Cs (%)

Advising Advlsing Advising Advlsing Advising Advlsing Advlsing

& confirming & confirming & confirming & confirming

6_ 60 60 3_ 6_ 45 60

0.05 15._0 10._0 2_.00 i_._ 3g.0% 3.00


190 if%at

it is liquid.

This seems to be the prevailing

fact that the economy could

pernaps

Central

up quite

be one of the reasons

despite

the

fast in the last two years.

why rediscounting

availments

This

with

the

Bank are at a lower rate.

Pre-shipment _hus,

loans were the typical

the usual credit

current the

has picked

situation

exporters reported

given

loans is between

by banks

have

loans provided

term was less than 180 days

rate for export

rate

export

access

14 to 18 percent

to their prime

to bank loans.

by the sc3mpie banks most

(see Table

custaners.

probably

applies

The

is close

that

on

banks.

V.25).

which

Note

Hence, the rate

Dy

not

export

t_)exporters

to all

loans

whom

they

Usually,

they

cons ider cred itwor thy.

Banks lend

in

the Philippines

to exporters

exporters the pre-

and

up to 70 percent

on the strength

assigned

post-shipment

c(_nservative.

Of the L/C.

of an L/C even

L/C, the most common

exPorter-borrowers collateral

are extre_ely

if it is irrevocable.

type of collateral

loans are real estate

with

the

ranges between

bank

and

asked

to 125 percent

some

difficulties

lend

Aside

fr_ for

deposit/placements

of

The

by

to

banks

(see Table V.26).

i_0 percent

Banks have been encountering

But they do not

value

of

the

of tt]e loan value.

in extending

financing

9, "

to

local

exporters.

exporters'

products

The mos_ comaon do not appear

This

partly

about

the creditworthiness

The

to be

There

is no mechanism

information

second most

of importers of

common

difficulty

that

Philippine local

the

(s_e

have very

by which

about the credit

is

creditworthy

stuns fr(_n the fact that banks

very big ones. lower cost

of these

buyers Table

little products,

except

banks can obtain

financing

to

V.27).

information

track record of numerous

in extending

of

the at

a

importers.

exporters

is


191

AMOUNT

Table V. 24 OF EXPORT LOANS GRANTED

IN 1988

Sourced Banks

Amount of Export Loans (in Pesos)

1 2 3 4 5

1,544,993,455.94 450,000,000.00 530,518,997.00 314,607,600.00 139,889,100.00

6

7

From

Refinanced through CB Rediscounting %

Special Lending Programs (e.g. ALF, IGLF, etc.)

Own Funds %

83.0 47.0 90.0 80.0 36.0

0 0 0 0 0

17.0 53.0 n.a. n.a. n.a.

80,000,000.00

"100.0.

2,053,000,000.@0

I

0

79.8

1.9

Table V.25 EXPOrt LOANS

.... Distribution of Export Loans by Credit Term (%) Banks < 180 days 180 days to 1 year

1 2 3 4 5 6

i_0.0 90.0 90.0 n.a. 100. _ 100.0

0.0 10._ 10.0 n.a. 0.0 0.0

7

96.6

3.4

Note: n.a. - No Answer a/ ~ Prior to CB Rediscounting b/ -Upon CB Rediscounting

Current Rate on Export Loans (% p.a.)

18.5 14 to 18 15 to 18 n.a. . 16 17 to 19 a 14 to 16 bE 18

Current Rate to Prime Customers (% p.a.)

17 17 20 n.a. 16 17 a/ 14 b/ 16

0

18.3


192 Table V o26 TYPES OF COLLATERAL

Banks

Post-Shi[_uent Loan

Pre-Shigoent/Working Capital Loan

123 45

123 125

nap nap 235 4 15

15 234 235 4 14

1 2 3 4 5 6 7

FOR LOANS

• •

NOTE: Collateral

- I 2 3 4 5

-

L/C Real Estate Mortgage Deposits/Placements Guarantee (Letter ,Corporate,JSS, etc. ) Others

nap - bank did not imve any post-shipment

Table V. 27 IN EXTENDING FINANCING

DIFFICULTIES (By Rank:

i = Most important;

TO LOCAL

7 = Least

loan

EXPORTERS

important)

Banks Difficulties

........... 1 2

3

4

5

6

7

8

n.a.

2

3

6

Export Loan is not profitable to the bank

3

6

n.a.

6

Size of transaction does not meet with bank policy _

5

2

n.a.

5

1

5

6

3

Country of buyer is not believed to be creditworttly

6

5

n.a.

4

4

6

2

2

Required luaturity of credit is believed to be unreasonable

4

4

n.a.

2

2

4

5

5

Buyer does not appear creditwor thy

1

i

n.a.

1

3

1

1

1

2

3

n.a.

3

3

4

4

Required interest rate believed to De low

Note:

n.a. - no answer

is

_ n.a.


that

the required

have

strong

typical and

preference

maturity

most

term

of credit

loans

of export

which

co_ared exporters

to

unwillingness

want

encountered

away

from

to pay a high

the

additiont ..

_enks

as

all, exc?pt ..- ,, .

information

to evaluate

why post-shipment

Only

one bank, • ,.. foreign

imposed

post,shipment

admitted indirect

their

_

mOSt

exporters

common

uncommon

low among

inability

or

admitted _ .

the

problems documents

are encountered . . ,

loan

by

requests.

that they do not have

buyers. • This

restrictions

common

In

sufficient

is one of the major

reasons

by banks.

claimed

that current

in its

lending

Central

that

Bank

affect • its

to the low loan value

and

of rediscounts.

banks

indirect

by these

indicated

exporters.

that they offer domestic But of these

five banks,

two banks were estimated

of the total loans granted

that indirect

most

to pay is

in

to have lent to indirect ••exporters. The aggregate

five percent suggest

of

export

maturity

to support

not

Similar problems • ,

shorter

credit

It is

discrepancies

to lend to exporters..• And these pertain

Five of the sample

other

are willing

ability

period

The

because

loans are least Preferred

have

long-

them.

are

One of •the seven •sample banks

regulations

the

Very rarely do they give

loan requests,

banks

regards

above,

rate.

and insufficient... collateral.

sample

out

Banks

days,

obtain.

banks

export

sample

As pointed

rate exporters

interest

pre-snlpment

by

to

to be unreasonable.

by banks is less than 18_

loans.

bank_ want to charge

turn

As regarus

submitted

exporters

what

loans.

loans extended

is that tile interest to

is believed

for short-term

of these are pre-shipment

difficulty

the

maturity

exporters,

in 1988.

letters only

Most of the sa,ple

who are mostly small

two

loans granted

to be between

producers,

be

of

one

to to

banks given


194 preferential

rate for their export

loans

under

a special government

lending

program.

As

mentioned

guarantee IGLF.

in

facilities

Five

guarantee

of

the

the seven sample

facilities

Table V.29,

total export

Banks

market

using

loan applica£ion

of

the

(see Table

the guaran%ee o_iy a small

existing GFSME,

availed

V.28).

of

and the

But in 1988,

facili{ies.

As _hown

proportion

of exporters •that are

evaluation

pr0je_%,

export _ record

stockholders.

to

their

Investigation

applications

and•icredit

Bureau

being submitted

to find out through

system,

submitted

for

financial

and

quality

of

resources

of

such as

debt-servic_;capacitys

Five of the seven sample

Credit

Of

three

Philguarantee,

have themselves

loans were

their standard

viability

and current

are

loans.

management,

the

banks

banks utilized

the guarante6_

there

namely:

at one time or another

evaluate

guarantee

section,

in the Philippines,

only three of the sample in

earlier

experience,

• and

banks •have ta_ed

(CIB)

in

for guarantee.

CIB the loan applicants'

the services _ of

evaluatfng

_export

More specifically, repayment record,

loan

they

want

court

cases

loans with other banks.

the

•seven sa_ple

banks, only

two had experienced

calling

on

the

!

guarantee

on some of the loans they granted

Both of them said

Numerous stringent problem seven

docunentation

requirements,

criteria

the Philguarantee

sample banks

•(see Table

V.30).

that their claims were paid.

evaluation with

to exporters

suggested

long

were mentioned facility

by

evaluation three

(see Table V.31).

that the existing

process

banks Three

as

and their

of

the

guarantee •programs _should be


195 Table V. 28 BANKS' AVAILMENT OF GUARANTEE FACILITIES

Banks

Guarantee

Facilities

1

2

2 3 4

23 none none

5 6

1 3

7

Note:

123

Guarantee

Facilites:

1 - Philguarantee 2 - GFSME _,3 - IGLF

RATIO EXPORT

TaDle V.29 OF GUARANTEED LOANS GRANTEU

Banks

Ratio

1 2 3 4 5 6 7

Note:

nap

LOANS TO IN 1988

(in

%)

2 nap nap 1 0 < i

- not

applicaDle


CLAIMS

: Banks:

1 2 3 4 5 6 7

Note:

Claims Philguarantee

: : : : : : :

MADE

Table V. 30 UNDER THE

Made

:

GFSME

2 2 2 2 1 2 2

2 2 2 2 2 2 2

nap - not applicable Claims Made : 1 - Yes; Claims Paid: 1 - Yes;

PROBLEMS

WITH

BanKs

Note: 1 2 3 ,4 5 6 -

Table EXPORT

PROGRAMS

Claims

Paid

IGLF:Philguarantee

2 1 2 2 2 2 2

: : : : : : :

GFSME

nap nap nap nap nap nap nap

nap nap nap nap nap nap nap

2 - No 2 - No

V.31 GUARANTEE

Philguarantee

1 2 3 4 5 6 7

GUARANTEE

FACILITIES

GFSME

15 6 6 6 2 6 23

IGLF

6 6 6 6 6 6 1

6 6 6 6 6 6 45

Problems: numerous documentation requirements long, evaluation, process stringent,evaluation criteria limited coverage of collateral snorter maturity of the scheme none

IGLF

nap 1 nap nap nap nap nap


IS7 modified.

Their

procedures, claims,

specific

reducing

higher

for processing

guarantee

is,

indicated

who

as

rate,

follows:

clearer

cover up to 85 percent,

does not have an export

however,

that

exporter

and interest

are

most welcomedby

they will seriously has

secured

credit

banks.

consider

an export credit

insurance

the loan insurance

2.@

Exporters

The

major

such in

exports

which

As

markets

the

have

circuits.

and electronic

All, except

high value-added.

foreign

their products

in one Country.

The

firms

an

However, the

export

to

of

(see

prawns,

to

electronic

two firms

form

by

varied

such as

majority

in finished

markets, •only two

are

are producing

A great

banks

by exporters.

accessories,

products,

their products

exporters

products,

such as toys and toy

•exported/sold

which

are

products

for

the

sample

(see Table V.33).

•have• concentrated

rest have fairly

in

diversified

(see Table V.34).

Table • V.35 sample

lines of the 23 sample

as integrated

garments

regards

marketing

product

accept

for loan application

They range from agricultural

engaged

•exporters

as a collateral

housewares,

products,

refer

policy

This

sample

policy.

insurance

and

period

application

credit

gifts

the

for

scheme.

Five Of the

all of them said that they will not automatically

V.32).

requira_ents

and shortening

almost

Table

simplifying

claims.

The Philippines facility

fees

recommendations

firms.

shows

the total amount

For the five indirect exporters,

to the value of commoditiessold sample

of sales and export

exporters

have export

sales

the export

sales

to final exporters.

Only

sales below

58 percent

of

of

the

reported five

their

of

total


198

Table V. 32 MAJOR PRODUCT LINES

Assets

A.

Export No.

Small-Scale 1 l 1 1

B.

C.

baskets (made from buri and coconut) abaca fabric bags, fashion accessories, garments, worked horn fashion accessories

1 1 1 1 1 1

9 10 11 12 14 17

1 1

28 blankets, clothing, decors, ethnic 21 toys and tolt accessories (buri)

Medium-Scale 2 2 2 3 2 4 1 13 2 15 1 22

Assets:

home decors

baskets, trays fashion accessories, office decor, cermnics cocowood ashtrays and jars home and office accessories (wood) native handicrafts marble slabs and tiles

fashion accessories rattan products rattan products banana chips prawns painted woodcarvings

19 processed foodstuffs 23 integrated circuits,

items

and shell

Large-Scale 2 5 stone in-laid furniture, bamboo, 2 16 natural rubber 2 18 furniture and handicrafts 1 3

NOTE:

i 6 7 8

Products

LED display,

1 - less than P5 million 2 - P5 million to P20 million 3 -more than P28 million

wicker,

leather

disk drives,

photo

detector


Table V. 33 FORM OF PRODUCTS/SERVICES EXPORTk39/SOLD IN 1988 (In Percent)

Products/Services Assets

A.

B.

C.

Exporter No.

Raw Materials

1 1 1 1 1 1 1 1 1 1 1 1

1 6 7 8 9 10 ii 12 14 17 2_ 21

0 0 0 0 0 0 0 0 0 0 0 0

_ 60 0 0 0 0 0 0 30 0 _ 0

0 0 0 0 0 0 0 0 0 0 0 0

10_ 40 100 100 100 100 100 100 100 100 100 100

0 0 0 0 0 0 0 0 0 0 0 0

2 2 2 1 2 1

2 â&#x20AC;˘3 4 13 15 22

0 0. 0 0 0 0

0 100 0 0 100 0

0 0 0 0 0 0

100 0 100 100 0 100

0 0 0 0 0 0

2 2 2 1 3

5 16 18 19 23

0 0 0 0 0

0 100 _ 0 100

0 0 0 0 0

100 0 100 100 0

0 0 0 0 0

F_all-Scale

Semi-Finished

Capital Goods Consumer Goods

Services

......

Medium-Scale

Large-Scale

NOTE: Assets - 1 - less than P5 million 2 - P5 million to P20 million 3 -more than P20 million


200

T_l e V.34 COUNTRIES MHERE FIRfl EXPOR?ED TOIN I988 (In Percent to Total Exports)

Assets Exporter â&#x20AC;˘ No.

USA

Japan _ermanynecnerlanos .ong_ong_stralIa

1 6 7 8 9 II II 12 14 17 20 21

6 0 39 9m 89 lO_ nap 96 n.a. nap 79 15

g 8 0 50 2 _ 0 B 6 8 6 9 nap nap 5 2 n.a. n.a. nap nap 9 6 1D 36

2 3 4 13 15 22

49 nap 75 nap nap 34

29 nap 29 nap nap 33

5 16 1B 19 23

85 6 0 1.5 44

3.75 9 9 8 19

S. Korea France:Others

A. Small-Scale 1 I 1 I 1 l 1 1 1 1 l 1

0 0 9 0 _ 0 nap B nap 9 15

6 0 2 0 26 9 nap 5 n.a. nap $6 6

88 B 6 0 6 g nap 6 n.a, nap 6 6

I 50 6 i 6 6 nap @ n.a. nap 6 6

15 nap 5 nap nap 9

9 nap 9 nap nap 9

15 nap 9 nap nap 33

9 nap 9 nap nap I

9 nap 9 nap nap 9

16 nap ! nap nap I "

9 nap 6 nap nap 0

3,75 9 9 9 2

_,75 19 9 9 B

3.75 9 0 9 9

9 9 9 9 9

6 199 9 9 9

9 9 6 9 9

9 9 99 99.5 l_4

n.a.

21 I O. 6 9 69 I II 8 9 6 i nap nap 0 2 n,a. n.a. nap nap 6 g _0 _.6

D. Hediue-Scale 2 2 2 i 2 I C. Large-ficale 2 2 2 1 3

NOTE:Assets - 1 - less than P5 million 2 - P5 million to P29 million 3 - morethanP29million n.a.- no answer


ANNUAL

Assets

IExporterl

â&#x20AC;˘ A.

Annual

1987

SALES

Sales 1988

I

Total

Export

1987

Sales 1988

Small-Scale 1 6 7 8 9 10 ii 12 14 17 20 21

nap 380,000.00 4_0,000.00 270,000.00 123,000.00 566,020.04 32,000.00 nap 400,00.0.00 2,180,000.00 980,000.00 1,900,000.00

423,475.00 420,800.00 450,000.00 140,000.00 165,000.00 1,698,060.12 48,000.00 200,000.00 200,000.00 2,000,000.00 2,000,000.00 2,400,000.00

2 3 4 13 15 22

9,600,000.00 3,800,000.00 430,499.70 6,500,000._0 1,800,000.00 8.,991,699.77

10,30_,000.00 4,600,000.00 9,944,874.38 8,000,000.00 2,850,000._0 9,541,627.32

nap 380,000.00 300,000.00 91,000.00 50,000.00 452,816.03 8,000.00 nap 400,0_0.00 625,000.00 120,000.00 1,900,000.00

320,000.00 420,000.0_ 350,000.00 21,000.00 35,000.00 1,358,448.10 10,0_0.00 150,000.00 200,_00.00 910,_00.00 400,000.0_ 2,400,000.00

8,500,000.00 3,.800,000.00 353,175.70 6,500,000.00 350,000.00 5,313,638.86

9,708,000.00 4,600,000.00 4,326,981.27 8,000,000.00 1,300,0_0.00 8,122,402.55

Medium-Scale 2 2 2 1 2 1

C.

Total

I 1 1 1 1 1 1 1 1 1 1 1 1

B.

Table V. 35 SALES AND EXPORT (In Pesos)

Large-Scale 2 2 2 1 3

5 16 18 19 23

21,446,000.00 30,900,000.00 60,874,865.30 34,854,000.00 42,400,000._0

NOTE: Assets - 1 - less than P5 million 2 - P5 million to P20 million 3 -more than P20 million nap - not applicable

36,091,000.00 48,600,000.00 58,091,616.10 31,798,000.00 49,300,000.00

21,446,000.00 11,080,000.00 60,266,116.00 34,363,000.00 42,400,000.00

36,091,000.00 34,700_000.00 57,510,699.00 31,665,000.00 49,300,000.00


2O2

annual

sales in 1988.

exporters. highest

The lowest export export

export

sale

transactions

Among

firms,

average

highest

was _40M.

importers.

three

five firms suffered

years, in

the same period

firms realized

excess

of 100 percent.

Almost 1988

earlier

by

varies

of

was

located

The

while

their are

in the

V.36).

varies.

_ii,000,

export goods

the

individual

(see Table

also greatly

the

goods

to

consolidated same

country.

take care of the insurance

rate

because

trading

activities.

It is

sales over

export

prefer

and

Table

V.39,

in

export

that

three

the last three years

the

in

upon

shipment

information

provided

for

at

regarding

do not nave adequate

least

two

palAnents

of

information

is that ti_ey need

most of t_em are self-financing As shown in

noteworthy

this arrangement

The other

over the last

growth

in cash or L/C

the uncertainty

that exporters

of importers.

turnover

in

sales

impressive

This corroborates

is that it reduces

record

a quite

firms usually

Exporters

sold especially

in their export

(see Table V.37).

Table V.38).

banks. One

track

a decline

a growth

all sample (see

reasons.

the

importers

while the rest achieved

small

goods

to importers

transactions,

size

van to deliver

exporters,

sample

or $1,000 while

The

transactions

the

cost.

Only

sale

transactions

use containerized

In the case of saall

all export

to $3M.

firm widely

of individual

typically

vary among

in 1988 was _21,000

by an individual

one van and sent together

freight

in

sale

was _57M or close

size

Exporters

In almost

sales considerably

the size of individual

lowest

into

The export

tl]eir export

high

about sales

production/

15 out of 23 respondent

firms


203

AVERAGE

Table V. 36 SIZE OF TRANSACTIONS

IN 1988

(In Pesos)

Assets A.

B.

C.

Export No.

Average

Size

Lower

Range

Upper

Range

Small-Scale 1 1

1 6

120,000 n.a.

95,000 n.a.

140,000 n.a.

1 1 1 1 1 1 1

7 8 9 10 ii 12 14

175,000 52,500 67,000 300,000 11,000 20,000 n.a.

100,_00 20,000 60,000 50,000 2,0_0 10,000 n.a.

250,00_ 85,000 75,000 350,000 20,000 60,000 n.a.

1 1 1

17 20 21

150,000 60,000 110,006

n.a. 50,000 100,000

n.a. 80,000 120,000

2 2 2 1 2 1

2 3 4 13 15 22

800,000 340,000 250,000 1,200,000 n.a. n.a.

500,000 100,000 70,000 200,000 n.a. n.a.

2,000,0_0 700,000 400,0H0 2,400,000 n.a. n.a.

2 2 2 1 3

5 16 18 19 23

n.a. 2,000,000 n.a. 460,000 40,000,000

n.a. 1,500,000 n.a. 100,000 35,000,000

n.a. 2,500,000 n.a. 950,000 45,000,000

Medium-Scale

Large-Scale

NOq'E:

Assets:

1 - less than P5 million 2 - P5 million to P20 million 3 -more than P20 million


204

•Table V.37 CHANGE OF EXPORT THE LAST 3 YEA_S

PERCENTAGE IN

Assets

Exporter

Increase,

No. A.

B.

C.

NOTE:

SALES

(%)

Decrease

(%)

Small-Scale 1 1 1 1 • 1 1 1 1 1 1 1 1

1 6 7 8 9 10 ii 12 14 17 2_ 21

nap 10 3_ nap nap 150 25 nap• nap 46 120 150

2 2 2 1 2 1

2 3 4 13 15 22

60 20 1225 15 4_ 53

2 2 2 1 3

5 16 18 19 23

68 237 20 nap nap

nap nap nap 76 15 nap nap nap 50 nap nap nap

Medium-Scale nap nap nap nap nap nap

Large-Scale

Assets

- 1 - less than 2 - P5 million 3 - more than

nap

not

-

applicable

nap nap nap 8 10

P5 million to P20 million P20 million


2O5

RATIO OF

Table V. 38 CREDIT JTERMS•TO TOTAL• EXPOR%'_ (In Percent)

Export I cash or L/C Assets

A.

B.

C.

No.

Small-Scale 1 1 • 1 1 1 1

100 100 100 100 100 100

1 1 1

ii 12 14

nap 100 0

1 1 1

17 20 21

nap 100 100

180 days Over to l Year•

1 Year

0 0 0 0 0 _ 0

0 0 0 0 0 0

0 0 0 0 0 0

nap 0 100

nap 0 0

nap 0 0

nap 0 0

nap 0 0

nap 0 0

2

100

0

0

0

•2 2

3 4

nap 100

nap 0

nap 0

nap 0

1 2 i

13 15 22

nap nap 100

nap nap 0

nap nap 0

nap nap 0

5 16 18 19 23

100 100 25 10_ 34

Large-Scale 2 2 2 1 3

Assets: "

Less Than 180 Days

• 1 6 •• 7 8 9 10

Medium-Scale 2

NOTE:

IUpon Shipment

1 - less t/_an-P5 million 2 - P5 million to P20 million 3 - more than P20 million

nap - not applicable

0 0 25 0. 64

0 0 50 0 0

0 0 0 0.


206

Table SOURCES

Assets

A.

B.

C.

Export No.

V. 39

OF FINANCING EXPORT (In Percent)

Firm

Factoring House

Local Bank

PRODUCTION,

Foreign Bank

1988

Foreign Buyers/ Customers

Others

Small-Scale 1 1 1 1 1 1 1 1 1 1 1 1

1 6 7 8 9 10 Ii 12 14 17 2_ 21

100 i_ 100 i_0 10_ 0 100 20 100 100 100 40

0 0 0 0 0 0 0 0 _ 0 0 0

_ 0 0 0 0 0 0 30 0 0 0 30

0 0 0 0 0 _ 0 0 0 0 _ 0

0 0 0 0 0 0 0 50 0 0 0 0

0 0 0 0 0 100 0 0 0 0 0 30

Medium-Scale 2 2 2 1 2 1

2 3 4 13 15 22

100 100 100 0 100 100

0 0 x 0 0 0

0 0 0 100 0 0

0 0 0 0 0 0

0 0 0 0 0 0

0 0 0 0 0 0

Large-Scale 2 2 2 1 3

5 16 18 19 23

100 0 80 i_ 65

0 0 0 0 0

0 60 0 50 35

0 0 20 0 0

0 0 0 0 0

0 0 0 40 0

NOTE:

Assets:

1 - less than P5 million 2 - P5 million to P20 million 3 - more than P2_ million


207

are completely

financing

their export production/trading

activities

most of

the time.

About they

half

have

now

competitors.

especially

started

respondents they

are

Accordingly,

that

at present,

the

term

They noted

credit

increased

better

cash

or

credit

admitted

sight

L/C

of

buyers

about price their

already of

the since

commodities

in the future.

buyers that

competitors

have

competition

-export

competitive

to their

record

A great majority

they

are now

1988, only three out of the 23 sample firms

financing however,

from

a

financing

large orders,

export

local bank

picking

sales/ production

shipment

financing.

financing

has led almost

are It

are

is

worried

offering

was severely

obtained

For

was low.

all exporters

up the smaller

ones only.

constrained

the

better

(see Table V.40).

interviewed

The level

obtained

of financing

pre-shipment

two

exporters,

The lack of interviewed Thus,

access to

turn

the amount

by lack/absence

The same can be said of post-shipment

out of 18 final exports

in 1988

(see Table V.40).

the level of pre-shipment

to pre-shipment

four

have

terms to their buyers.

In

down

foreign

interviewL_d

their

180 days.

and will remain

that some foreign

their

had they offered

some of

the prices

that they offer

arrangement

who have shown good payment

said that they are not worried

competitive

about.

of their buyers

as

could

Many of the firms

for term L/Cs for about

confident

credit

same

said they

30 and 50 percent

customers.

larger.

asking

the

payment

they cannot go on for long demanding

since orders

becoming

that the

is about

a great ma3ority

sales between

definitely

claimed

their buyers

to their present

that

are

with However,

their export terms

of the respondents

of

financing.

post-shi_nent

of preOnly

financing

was low for two of

t21ese


2O8

Table V.40 PERCENTAGE OF EXPORTS IN 1988 WHICH WERE PRE-FINANCED AND RECEIVED POST-SHIPMENT FINANCING

Assets

A.

B.

Export

Small-Scale 1 1 1 1 1 1

No.

Pre-Shipment

Post-Shipment

1 6 7 8 9 10

0 0 0 0 0 0

0 80 0 0 0 0

1 1 1

ii 12 14

0 0 0

nap 0 0

1 1 1

17 20 21

0 0 30

nap 0 0

Medium-Scale 2 2 2 1 2 1

2 3 4 13 15 22

0 0 0 0 _ 0

0 nap 0 nap nap 0

Large-Scale 2 2 2 1 3

5 16 18 19 23

0 0 8_ 0 20

0 60 i_ 0 35

C.

NOTE:

Assets:

nap

-

1 - less than 2 - P5 million 3 - more than not

applicaDle

P5 million to P20 million P20 million


2O9 firms.

The lack of financing

severely

constrained

Respondent financing

the amount

firms

from

were

a local bank answer.

from

High

in 1988.

for not borrowing

four

said

that

adequate; do

not

export ever

the

services.

obtained

an export

services

they can offer;

Twelve of

the

23

sample

that many of them did not

borrow

with the export

inadequate;

financing were

of

asked

services their

to note that half

from local banks

by banks

rate was high;

of his

hank

of

were

just

that

they banks'

of those that

reasons

they

being

who

export

was too high compared

and loan maturity

bank;

local

claimed

The major

cited

respondents,

and the rest said the adequacy

inadequate.

reason

number of

finance

services

It is interesting

collateral

. interest

export

at all regarding

of banks

are the following:

obtained

Of the total

finance

has

ever

rate was the most coa_on

in 1988.

ten said that they were

finance

finance

This means

export

have any knowledge

they

(see Table V.41).

from banks

level of receivables

sales made by exporters.

whether

interest

only one was fully satisfied

a higher

of export

asked

firms gave a positive banks

to finance

cited to what

offered

by

banks was too short.

Of

the

special

23 respondents,

lending

programs

only one was able to borrow

of the government

term loan which was used for the acquisition

Six payment

of

the 18 final

exporters

of t/%e goods already

mentioned instead documents

were: of

cash

payment;

and delayed

payments.

with

The specific

of post-dated

short

It was

of a

the long-

assets.

problems

to i,_orters.

issuance

alleged

of fixed

encountered

delivered

non-payment;

(i.e., EIMP).

from one

shipment;

check

for

regard

to

problems 30

days

non-acceptance

of


210

EXPORT

Export No.

Assets

A.

Gov't Prograa

Processing Time for Loans (days)

Local Banks Export Finance Services

office

ownership

1 6 7 8 9 IM ii 12 14 17 20 21

branch branch nap nap nap nap nap branch nap nap nap branch

gov't private nap nap nap nap nap private nap nap nap private

n.a. nap nap nap nap nap nap nap nap nap nap nap

7 nap nap nap nap nap nap 5 nap nap nap 3

3 4 4 3 3 4 4 2 4 3 4 3

2 3 4 13 15 22

branch nap branch branch nap nap

private nap private private nap nap

nap nap nap nap nap nap

3 nap 7 2 nap nap

2 3 3 1 4 4

gov't private pr ivate private private

TLRC nap nap nap nap

365 3 5 2 7

3 2 3 2 3

Medium-Scale 2 2 2 1 2 1

C.

Bank

BANKS

Small-Scale 1 1 1 1 1 1 1 1 1 1 1 1

B.

Table V. 41 FINANCING FROM LOCAL

Large-Scale 2 2 2 1 3

NOTE:

5 head 16 branch 18 r_ead 19 head/branch 23 branch

Assets:

1 - less than P5 million 2 - P5 million to P20 million 3 - more than P20 million

Service

: 1 2 3 4

-

Fully Satisfactory Adequate Inadequate No Knowledge

nap - not applicable n.a. - no answer


211

Five

of

suddenly

were

their orders

by importers

to _400,000.

cancelled,

problems

18 final exporters

cancelled

L/Cs opened _100,000

the

while

the

of export

and insolvencies

said that exporting

Despite optimistic

various

regards

expected

increase

percen t

over

them are now actively

Table

The

But

already

ranged

from

tithe el_ment,

of the exporter

orders

financial

as the

reasons

period

that there

is a high

Six of these

level

of

respondents

for the next

new products

three

are

very

years.

The

firms ranges between

(see Table V.43).

new export

they

markets

A great

300

majority

of

for their products.

to be marketed

'limited or lack of

60 and

in specific

financing

could

Some

countries douse

the

of exporters.

Inter-Agency

Projections

Foreign

Study

Group

Operations

on

Committee

External which

Bank has been making

dialogues

with exporters

years.

presents

a c_nprehensive

Table

bottlenecks

involved

now facing exporters,

by individual

pursuing

V.44).

had

the reason why export

industry.

export prospects

of them plan to introduce

buyers

to these problems.

problems

a three-year

Four of them

cited

indicated

in their

in exports

wherein

orders.

has contributed

the as

firms

and labor problems

of the 23 respondents

bankruptcies

enthusiasm

three

cases

The value

Two firms did not know

for the cancellation

(see

(Table V.42).

for their orders.

of the importer

Eight

experienced

V.45

related

recommendations

to financial

to ease/eliminate

matters

Trade

Statistics

is chaired

twice a year summary

encountered

the bottlenecks.

of

by

the

and Central

for the last two the

by exporters

problems/ and

some


212

CANCELLATION

Export No.

Assets

A.

C.

BY BUYERS

Value (In Pesos)

ReasOns

Payment Terms

Small-Scale 1 1 1 1 i 1 1 1 i 1 1 1

B.

Table V. 42 OF ORDERS

1 nap 6 time element 7 nap 8 financial problems of importer 9 nap 10 nap ii nap 12 nap 14 none 17 nap 20 labor problems of the exporter 21 nap

nap 400,000 nap n.a. nap nap nap nap 100,000 nap 250,0_0 nap

nap

Media-Scale 2 2 2 1 2 1

_ 3 4 13 15 22

nap nap nap nap nap none

nap nap nap nap nap n.a.

nap nap nap nap nap 145

Large-Scale 2 2 2 1 3

5 16 18 19 23

nap nap nap nap nap

nap nap nap nap nap

nap nap nap nap nap

NOTE:

Assets:

napn.a.

1 - less than P5 million 2 - P5 million to P20 million 3 - more than P20 million

not applicable - no answer

Payment

Terms:

1 2 3 4 5

-

L/C Document against Docuaent against Sight draft others

payment acceptance

1 nap 1 nap nap nap nap 5 nap 1 nap


213

EXPORT

Assets

A.

B.

C.

NOTE:

Table V.43 PROSPECTS FOR THE NEXT THREE AND PROSPECTIVE MARKETS

YEARS

Export

Countries

No.

% Increase

Small-Scale 1 1 1 1 1 1 1 1 1

1 6 7 8 9 10 Ii 12 14

120 60 80 100 10_ 100 100 200-300 60-70

12 1234 1235 5 nap n.a. nap 1234 7

1 1 1

17 20 21

nap 100 280

nap 123 3

Medium-Scale 2 2 2

2 3 4

150 nap 300

3 123 123

1 2 1

13 15 22

nap nap 100

nap nap 123

Large-Scale 2 2 2 1 â&#x20AC;˘3

5 16 18 19 23

n .a. 200 60 90 60

1 - less than 2 - P5 million 3 - more than

P5 million tu P20 million P20 million

Assets:

Countries:

1 2 3 4 5 6

-

USA Japan Europe Australia Hongkong others (Korea, Taiwan, Papua New Guinea, Middle East)

7 - no nap - not n.a. - no

pursuing answer

new

country export

in mind markets

n .a. 56 3 16 126


214

Table NEW EXPORT

Assets

A.

Export

No.

Countries

1 charcoal briquets & coconut husk 6 n.a. 7 carabao horn & bone accessories handscreened dresses & beach wear

1 1 1

8 9 baskets I_ ceramics

i 1 1 1 1

ii nap 12 handpainted wooden jars 14 a/ 17 nap 20 ladies & children wear (with ethnic design), bags 21 furnitures (buri)

1

C.

Products

Small-Scale 1 1 1

B.

V. 44 PRODUCTS

Med ium-Sca le 2 2 2 1 2 1

2 stonecraft 3 4 13 15 22

Large-Scale 2

5

2 2 1

Assets:

fashion nap nap nap nap nap

nap 56 1

accessories

n.a.

16 latex, steel 18 b/ 19 sacks for sugar work clothes 23 FAX, numeric

3

N_gE:

n.a.

3

3 nap nap nap nap nap

56 3 6 26

1 - less than P5 million 2 - P5 million to P20 million 3 - more than P20 million

- would

Countries:

nap 134 n.a. nap 12

n.a.

and coffee,

nap - not considering new products n.a. - no answer a/ - same handicrafts but with different and made from different ,materials b/

2 n.a. 1235

design

like to know

1 - USA 2 - Japan 3 - Europe 4 - Australia 5 - Hongkong 6 - others (Korea, Taiwan,

Papua New Guinea,

Middle

East)


TableV.45

215

SUI_ARY OFSELECTED FINANCE-RELATED PROBLEMS, RECO_ENDATIONS AND P_PECTS, DECEIVER INDUSTRY DIALOGUES CONDUCTED BYTHE IASG

INDUSTRY SECTOR

BOTTLENECKS

RECONNENDATIONS

ABENGY INVOLVED

A, Proble_/Recomndetione Common toAllIndustry Sectors High financing cost.

Provide necessary financing andcredit CB facilities atrelatively easy terr_ to Cautious moodinthefinancial market beusedintheprocurement ofneeded ingiving credit access tosmall-and rawmaterials intheshort term, and medium-scale industries which results in additional purchase ofcapita] equipment inadequate financial assistance for andexpansion projects inthe]ong term. theiroperations andexpansion, Review ofCBrediscounting policy with CB Collatera} requirement isoveremphasized theendinview oflowering rediscount rather than giving more weight topast rate tostimulate borrowings and performance andeconomic viability of including s_llandmedium-scale firs theproject, inexport packing credits. â&#x20AC;˘Work towards thereduction ofthe{BCB imposed reserve requirements oncommercial banks' liquid portfolio, particularly if acertain percentage ofthese funds is forexport, Theinterest spread slapped bycommercial banks onrediscount loans borrowed from CBshould be.examined. Ease upthestrin_bnt requirement on collaterals, particularly forsmall-and medium-scale enterprises toenable _hem tnavail themselves ofthenecessary financing andgive them opportunity to grow anddevelop. Size exporters preferential rates of interest andcollateral-free loans.

Problems/Reco_ndation ofSpecific Industries (I)Sugar andMolasses Inadequate financial assistance to planters,

Give deserving planters preferentialCB/SRA rates ofinterest andco}]atera)-firm ]oans,

(2} Coffee High financing costimpedes thegrowth Facilitate credit andfinancing require-CB/DTI ofinvestment intheindustry, merits ofgrowers inorder toimprove â&#x20AC;˘production.


216

INDUSTRY SECTOR

BOTTLENECKS

RECOM_)ATIONS

ABENCY INVOLVED

(3}Tobacco Inadequate funding which affects the â&#x20AC;˘operations oftheNational Tobacco Administration.

Provide easy credit andfinancing CB/DF packages togrowers, specifically those geared towards theexport market.

(4)Fish andFish Products Limited andhigh cost offinancing hinders efficiency inoperation,

Provide preferential interest rates and CB/DF financial pack_les toboost production.

(5)Furniture andFixtures Limited financial support, especiallyGive preferential interest rates andlow-CB/DOF tosmall-and medium-sized producers cost financial packages toexporters to inhibits thegrowth oftheindustry, boost operations.

(B)Handicrafts Inadequate financing andcredit facili-Give preferential interest rates andeasyCB/DF tiescoupled with high interest chargesfinancial terms toenhance productien forinvestment andoperational purposes, andexportation

(7) G_rmentslTextiles Cautious attitude inthefinancial Develop small-and n_dium-scale garment CB market ingiving credit access tosmall fires bygiving them access topacking andmedium scale industries fortheir credits andother financial packages at operations andexpansion, lower interest rates andeasy collateral requirements. High financing cost,

(8)Processed Food andBeverages. Highlending rates charged bylocal livepreferential support toexportersOB banks which make exporters uncompetitive with regard totheir financial intheworld market relative toother requirements. Asian exporters, Discrimination intheextension ofbank credit agains smallandmedium-scale enterprises forinvestment and operational purposes.

Source: Inter-Agency Group onExternal Trade Statistics andProjections Foreign Operations Committee, Central Bank ofthe Philippines, Annual Report 1987.


217 VI.

OVERALL

This system

chapter

in

export

EVALUATION

provides

system

Theoretical

export

syst_n

financing

presented systems

Financing

schemes

in the Philippines.

of the

export

the evaluation,

out at the outset below

of helping

the presentation,

working

IN THE PHILIPPINES

a

financing theoretical

System

capital

that the theoretical

is not necessarily

that we could

for the purpose

shipment

evaluation

To facilitate

to point

devised

To simplify

SYST_

is first presented.

Export

It is important financing

a general

the Philippines.

finance

A.

OF THE EXPORT FINANCING

think

requirement

best

one

among

of for the Philippines.

us analyze

we will

the

export

the existing

export

limit ourselves of

It is

financing

only to the pre-

exporters.

We

assume

the

following:

(i)

the economy

has an active

(2)

the economy

has both export

(3)

the

economy

has

a

c_amercial

banking

and d_estic

well-functioning

system;

L/Cs; Export

Credit

Guarantee

Corporation; (4)

the Central

(5)

the

Central

Bank refinances Bank considers

for rediscounting; (6)

all raw materials

From purely instead

the demand

traders)

who

side,

export

loans of commercial

banks;

loans of indirect exporters

eligible

and are available

locally.

the key players

do not manufacture

from local manufacturers,

this case the indirect exporters

are:

the direct

exportable

goods

and the local manufacturers since

exporters but

buy

who

they do not sell directly

are

(or them in

to foreign


218

buyers.

From

the Central

the supply

Bank, and the Export

Thetransaction Step

1 -

process

Exporter (L/C)

date

Exporter to

proceeds

receives

•preparation 2 -

Credit

to

I

assigns

L/C to local Bank

a Back-to-Back

obtains

Guarantee Step 4 -

Inland

Against the

If):

Letter

of

terms to

adequate

Credit include

period

for

assigned

I as support

for his

Letter of Credit Exporter

guarantee

request

(BB L/C)

in

(IE).

from

Export

Credit

(ECGC) i ar_ export L/C

opens

through

Bank

II a BB L/C in

favor of the IE in local currency

up to a certain

percent

of

value

of

L/C, available

for

shorter

period

than the export

the

IE • assigns loan

equal

purchase Step

6 -

Step

7 -• Grants

Step 8 -

(see Figure

an

or Indirect

a pre-shipment

Corporation

and shipment Step 5 -

Corporation.

an immediate

provide

banks,

and shipment.

establish

Bank

the commercial

under pre-determined

favor of the manufacturer, Step 3"-

Guarantee

in his favor

sufficient

are:

as follows

at sight in dollars

expiry

Step

side, the key players

Bank

underlying

export

L/C to allow

receipt

of product,

a

the

packing,

by exporter. the BB L/C to Bank up

to a certain

of raw material

II obtains

II and requests percent

and working

pre-shipment

a

of BB L/C to

local be

currency used

for

capital.

guarantee

from •BCGC;

loan to IE; and

Refinances

loan with the Central

Bank;

2H/T_s-- is drawn frcm the hand-out provided by during the Commencement Workshop for the study of Selected DMCs, Manila, 22 - 23 September 1988. •

Mr. Bruce Nicholson Export Financing in


219

Figure

[xporterlTradi_g

Co.

----

II

Local

Manufacl:urer-.---Lo¢al

Suaplie.,

-

-

n

"

n nn

I -

|

l "

I ,

s,,j,_:L,c/ • , _

t_

,

_

iEXPORTE_]

I

l 4.

.I

.Ss slt_,t

l l I

. I

'., I t l

I

:I.

, I

i,-,,_,,-,'J " • | _.

1

|

IEXPQR'rER

: --

!

I

Et

._ ' I "'Pur_h_l'e

I I

'

• _ GOad,

,

l '

;;

;

I

_'

I

_--IPRoouc¢"sl'

"

:

I Loan 7.

I

i :.o

: '

;: : ;

. I

L/C I

2. A_gt _n t./C

I

I

,. :,._zo, = _l '/ '

,

='='"'='""'"="'""""" Cr,P=l:ton o_ OeO¢

;

,

I euve,I ,

••

'

:

,

"

.

I Z.. F'x

L

I . ..

,

L. 11 ] _,..L

.,

Ouar'an_ee P,'e_h I amen_ I 'I _. Pregl_t

"

): ''-1_ l_mle._ll:

_CG_

Guarantee

l

8. Re_ t nar_¢ed l.Oan

!

. EXPORT

:

OEVELOFMENr ........ .... iFX --

lI I ! l

F'U.N,D . , •

:l t

_RI'

E:T I

'=

;


220 Step 9 -

IE

uses cash to purchase raw material from local

suppliers

and

begins the manufacturing process.

It

is

important

to

point out

that

under

this

system,

indirect

exporters WhO may be small producers have ready access to the rediscounting window of the Central Bank. guarantee

scheme

Moreover, the existence of a

encourages banks to provide loans to

well-functioning small

and

medium

exporters.

B.

EValuation of the Export Financin9 System

AS may be gathered from Chapter V, the export financing system in Philippines scheme,

consists

financing

of

three

scheme,

and

major the

components, guarantee

namely:

scheme.

the

refinancing

Each

of

these

Bank

has

been

particular,

non-

components will be evaluated below.

1.0

As pursuing

Befinancing Scheme of the Central Bank

indicated an

traditional eligible

in

the preceding chapter, the Central

export-oriented rediscounting policy. exports

In

are preferred over traditional exports.

Like

other

papers, export loans (whether pre-shipment or post-shipment)

can

be rediscounted at 8[_percen.tof the loan value with a rediscount rate that varies with the market rate. for another 90 days.

The maturity period is 90 days and

renewable

Rediscounting can be processed within one day if

papers

are

in order and are submitted before noon to the main

branch

office of the Central Bank.

office

With the open market operation of

Central Bank, rediscounts on export loans will not be severely affected any change in monetary policy.

all or the by

All these ensure quick and automatic access

of exports to the rediscounting facility of the Central Bank.


221

the

However,

the facility

context

of the framework

underdeveloped

he rediscounted

At present, is

because

alternative

the banking of

facility

rediscounting

availment

started the

to pick up.

a certain

rate.

and post,shipment

terms

depreciation

implications

by

on reserve

money.

1990 is I_86'4B, whereas the same year

four percent

the Central

is only _26.4B.

while the forecasted

pre-

pre- and post-shipment

in 1982 at 68 percent.

direct

This

those to

the

the

low

that

assuming

very

well

without

and post-shipment

financing

exceeded

suggest

the reserve money

money

liquid

on an outstanding

This can facility

target

a be

serious

target

for

financing is

for

_IIOB,

is only _41B.

to co_%_ercial banks Since

of

has already

in 1988 III

of

In the

to reserve

then it _went down to

only

in 1987.

The effectiveness

only

low.

and _167.2B,

In 1992, the reserve

money was achieved

a wide

exports

_72.8B

For instance,

ratio of total rediscount

reaching

they

The economy

a year.

1980s, the highest

about seven percent

because

that the generally

requirements

Bank rediscounting

the forecasted

moment,

availability

than

in Chapter

financing

peso

accommodated

better

presented

in 1990, 1995 and 2000 will be _29.4B, of

The

degree has contributed

basis

rate

in

remain

As of this by banks

liquid.

is only temporary.

Our forecasts

will

rate is relatively

But it is believed

system

L/Cs

THUS,

Bank.

availment

with

policy.

less preference

is generally

loans

exporters.

domestic

In fact, actual merchandise

level.

the pre-shipment

system

to

of the banking

targeted

are given

with the Central

rediscounting

situation

rediscounting

the rediscounting

sources

only to direct

laid out earlier,

under the present

loans of indirect exporters cannot

is limited

of the rediscounting

range of exporters

exporters.

But even

facility

is weakened

of the Central

by its policy

its effectiveness

in

Bank

in

to accommodate

supporting

direct


222 exporters

is

exporters.

of

undermined by banks _ attitude towards

credit

to

This will be discussed below.

2.0

Financing Scheme

The

commercial banking syst_

funds

for

international Philippines processing The

extending

the export sector.

is the most important potential

banking

are

at

varying

basically

procedure

All ccmaercial degree.

conservative.

banks

are

Commercial

Table VI.I

source

engaged

banks

outlines

commonly followed by banks and the

in

in

the

the

loan

approval

rates.

information contained in this table is based on an empirical study

Lapar are

and Graham (1988). Note that not all those who approached the given

prospective

a

On

loan application form.

The branch

manager

who

bank

interviews

borrowers determines who should be given an application

form.

the average, 58 out of 100 loan applicants who approached the bank

given loan applications.

by

are

Some of these loan applications are processed and

approved by the branch manager while others are sent to the main office for approval.

Banks

The overall approval rate is 53 percent.

have strong preference for short-term loans and

collateral-oriented. collateral with

the

As

reported

by

sample

banks,

are

commonly-accepted

are real estate mortgage and deposits/placements bank.

Some

collateral-short.

of the exporters did borrow

from

of

banks

obtained

wit_

banks simply means that the borrowers can easily obtain a

were relatively small.

Having a good credit

yet they are still required to present a collateral.

with

exporters but

So, they selected only _nall export orders since

they

exporters

basically

are loans

track

record

loan,â&#x20AC;˘ but

When new orders come,

either ask their customers to wait until such time

they

comply

the prior order and pay the bank so that they can use again the

same


223

Table VI.I BANKS' APPROVAL RATES APPLICAITONS RECEIVED

COMMERCIAL 10Z LOAN

FOR EVERY IN 1986

Screening i.

No.

of

2.

No. of (total

loan

applicants

who

approached

the

bank

loan applicants given and submitted no. of loan applications received).

loan

for

a

loan

108

applications 58

Processing 3a.

No. of loan applications total loan applications Approval

rate

No. of loan approval Dy head office received•from

at•the

approved received

manager's

level,

applications recommended the Board of Directors (for PDBs and KBs) out loanapplicants.

No. of loan applications approved or head office out of total loan the manager. Approval respect Approval

6.

rate by BOD•or to the manager's rate

in

Lapar

and

Graham

in

in of

stage

%

of 35

(3.a/2).

by the manager for (for RBs) or the area or of total loan applications

60

• 18

by the BOD applications

or at the area recommended by 18

at the area or •recommendation,

processing

Overall approval rate, approved *3a + 4b)/no. the bank for a loan.

Source:

by the manager out from loan applicants.

(3a

head in +

office _ with (4b/4a)

4b/2)

% = total no. o£ loan applications

loan who

100 91

applications approached 53

(19_8).


224 collateral exporters

for borrowing, we

intervie_t_d admitted

loan requests the

or simply turn down the order.

because

that hanks

they cannot present

collateral

has constrained

exporters

exporters

not borrow

turned down

additional

fact that they had valid L/Cs or l_)s.

Not few

Indeed,

to raise

their

of

additional

collateral

inspite

the lack of or

funds

the

to finance

of

limited

production

for exports.

Other present rate

an acceptable

very high

products. export of

_0.80

collateral.

This

Accordingly,

Other charges

per transaction.

therefore

Still others

is over and above what banks

transaction.

lower

from banks

because

they

could

find the prevailing

that would have an impact on the competitiveness

their L/Cs.

_2,000

did

than

the

a transaction

banks

charge

including

Since exporters B&P reference worth $5,000

normally

etc.,

are usually

rate for

lending of

their

for

every

_500 for advising

telex, mail,

implies

charge

exporters

could go up

paid between

every

a total

not

dollar

to

_0.50

they

cost of _5,000

-

earn, to

an

exporter.

There regulations example

is

a

tend

general to

of this which

perception

reward banks

among

exporters

and penalize

is taken from PHILFOODEX

that

exporters.

NEWS

Central Below

Bank is

(January 1989).

"Do you know how much you are losing because of the Bank ruling that requires us to pay our freight in pesos of dollars?

Central instead

Take a very recent example. Two Philfoodex members recently shipped their products abroad, incurring a freight cost of $1,350. But instead of allowing the exporters to just deduct the freight cost from the dollar proceeds of the sale, which could have been simpler, the rules required them instead to first get the peso proceeds of their dollar earnings at _21.25.

an


225 And then, they were made to turn around and, using the pesos that they got, to buy dollars to be used to pay for the freight. There, s nothing wrong about that, except•that when they bought the dollars these •cost _21.94. So from this transaction alone, the two exporters• lost _931.50. And this happened without even leaving the same bank from which they collected the dollar payments of their foreign buyers. Apparently, the CB wants But at what cost?"

This directly

is

of

the reasons

pay the freight

Thus,

in

bottlenecks whole.

one

the

seems

the banks

why

to earn extra

exporters

from • this.

prefer

that

importers

cost.

context

of our framework

to lie on the attitude

Even if tl_e Central

Bank

such loans are not forthcoming

is ready

then

above,

of banks

one

of

towards

the

lending

to •refinance export

its rediscounting

greatest as

loans,

facility

is

a

but if

rendered

ineffective.

The

special

bottleneck. been

More

left

out

enterprises. merely banks

the

the

to do.

case of

introduced

they have been addressed

banking

the point

system,

such

as

of the export

and export-oriented

that almost •all •of these programs study

ease

up

this

to those

who

have

small

and

to •partly

sector. however,

enterprises.

medium

institutions

of these programs

(i.e., ALF and IGLF} are well-endowed,

IGLF and ALF, a project

to

by non-financial

the resources

requirements

adds to the cost of borrowing

the

that they were designed

However,

d_aestic-oriented

noteworthy

have been

most of them are managed

to the financing

two programs

the

by

That

failed

programs

specifically,

underscores

relative

both

lending

do are

what small

Admittedly, they cater is

also

require hard collateral.

In

is required

from these programs.

which

It

to

unnecessarily


226 In these

the

programs

clientele been the

preceding

is

noted.

check whether

whom we

interviewed

their borrowers

of their criteria

can present

of the L/Cs, exporters

special

credit

While however

who probably

said

from other

loan applications.

as collateral

are concerned.

it is also worthwhile lending

could

of

at all

to

special

have catered

the

unnecessarily

raise

aS

a certain these

programs,

same

small

it

financing

credit

to

since

Thus,

insofar as the

to note that obtaining

institutions

of some

So long

from these programs.

out that these

exceeded

and can assign

range of exporters

could

have

credit programs

of a wider

fragmented,

programs

Officers

impact

and

wider

have already

program.

of

a

that they do not bother

can borrow

has been pointed

rates

reached

could have limited

small

different

_ave

programs

it

borrowers,

be that these

borrowed

assets

portion

requirements

It could

for approving

unincumbered

availment

they

loan limit from a particular

programs

high

Whether

the same set of borrowers

individual

is not part

been

the impressively

indeed questionable.

serving

these

they

have

chapter,

set

loans the

of from

cost

of

of

the

borrowing.

Recently, guarantee

programs,

(QGFB). while

have

the ratio of agricultural during

guaranteed

(1988) evaluated

namely GFSME,

All three programs

declined

the period

This

programs

did

agricultural

suggests not

result

sector.

negligible

in

Table

loans of

the ratio of

loans granted

funds

net

to

additions

Board

VI.2 shows

that banks

agricultural

loans

during

from

loans

and non-participating

Fund

commercial

increased

the additional

Participating

difference

window.

loans to total

1981 to 1986,

that

the effectiveness

IGLF, and Quedan Guarantee

liquidity

to total agricultural

period.

showed

Magno and Meyer

the granted

_ercial

in the ratio of their agricultural

the

same

guarantee to

the banks

loans

to


227

Table RATIO OF AGRICULTURAL LOANS AGRICULTURAL LOANS GUARANTEED GRANTED, COMMERCIAL

VI.2 TO TOTAL LOANS AND RATIO OF TO TOTAL AGRICULTURAL LOANS BANKS, 1981-1986

Ave rage

Ratio

(%7 i.

i.

Ratio •total

of agricultural loans

loans

Ratio of agricultural loans guaranteed to total agricultural loans granted

Source:

Magno

and

Meyer

(1988)

Average Growth

Annual Rate

(%)

to 7.3

-3.0

2.9

29.8

to


228 total

loan portfolio,

again suggesting

the ineffectiveness

of the guarantee

programs.

The 0._8

gearing

in

1984,

guarantee

In

our

in 1988.

Moreover,

that

the guarantee

it

one

implies

(i.e.,

that

the

sanple banks

of

the

the ratio

Philguarantee' s

effectiveness

facilities

availed

of guarantee_

have

for

been

loans

these

to

banks.

considered

less

to banks.

and

medium

is highly

provided

tb overseas

is compounded

outstanding total

of

SMI program

losses

export

desire

virtually

gearing because

incurred

have practically qualification

of

in

lack the

of

which

its

of

to attain a zero default

Central

it

Thus,

accounts

Meanwhile,

the

funds.

capital. in

for only

guarantees

which, is only two percent

rediscounts

to

guarantee

requirements.

exporters.

to _38.4M

by

facilities

dissipated

only 15 exporters

the total number

as of 1988 amounted

Philguarantee's

determined

contractors

was servicing

outstanding

The

capitalized,

guarantee

has been weakened

by its stringent

1988, Philguarantee percent

in providing

scale enterprises

it

0.3

below

loans had not been more than two percent

Although

This

1986).

only three out of seven

facilities

suggests

useful

small

in 1985 and 0.34 in

survey,

export

This

0.30

of GFSME has been substantially

fund had not been fully utilized.

guarantee total

ratio

Bank.

rate has rendered

of

the Thus,

the EGCP-

useless.

ratio of Philguarantee's it does not have

base

it on its readily

will

arrive at a gearing

available

EGCP-SMI program

a separate

liquid

fund.

resources

ratio of less than one.

But

of about

could

not

be

if we

were

to

_2_0M,

t_en

we


229 In

general,

example, loan

it

have

and

banks

is

requirements

loan

consuming.

and

to

and

guarantee

involve

of credit

a

Meyer

programs

more

paperwork.

institution

the possibility

For

service

(see Magno

First,

by the guaranteeing

loans to reduce

. .

time

more man-hours

than an ordinary

cumbersome

are • mandated

guaranteed

..

loan

is due to the •following reasons:

numerous

solely to

the GFSME program

This

Second,

a guaranteed

takes an average• of 308 percent

under

1988).

servicing

to

monitor

being

diverted

,...

other uses.

And lastly,••banks spend

so much

time in seeing

to it

that

.. _..

borrowers

would

not •default for fear of being . ,

concerned. program

As noted by Magno

brings

extra

value

not

program

consider

This

program,

one must

limited

no matter

suggests

inescapable

they

to

a

do

agency

guarantee

not

actually

stands

ready to provide

ineffectiveness

of the special

bottleneck.

of the existing

export

financing

autcmatic

lending

so

any

banks

do

long

as

of

a

severely

limited.

should

directly

system

frc_ our

programs

evaluation

While

the

refinancing

of• commercial

system.

othat

the effectiveness

to finance.

and quick

Indirect exporters financing

a strong•

on the part of exporters.

access

collateral-orientedness

Thus,

funded, will be

that can be drawn

Bank

of the fact

In the Philippines,

•to offer,

collateral

conclusion

of having

to collateral.

that an export

do not have automatic

the

of banks.

how well

exports

as a major

even if

ithe importance

collateral

that

loans,

accredited

not lose sight

as a substitute

the lack of or limited

The

being

to the banks

needs the support

guarantee

somehow

address

however,

lack or have

guarantee

and Meyer,

there is a consensus regarding program,

exporters

the

in the program.

While

guarantee

by

. ..

participate

guarantee

blacklisted

.,..

banks

and guarantee

suffer most

and

Central

of

export relative

schemes

from the

•is

serve

weaknesses


230 VII.

CONCLUSIONS AND AGENDA FOR POLICY AND INSTITUTIONAL RE_)I_MS

After a two-year recession (i.e., 1984-85) the Philippine economy resumed 1988.

its

growth path.

It achieved a solid growth of

6.7

has

percent

More importantly, the level of exports increased to $7.1B in

slightly

exceeding

remarkable Asian

the

targeted

level

for

that

year.

1988,

Despite

this

performance, the Philippines has been lagging way behind

countries.

merchandise

For

instance,

in

1970,

the

in

value

of

other

Philippine

exports was $1.1B, much higher than Korea's $835M exports

Thailand's

$?10M exports.

and

Thailand

were

biased

performance

In 1988, however, merchandise exports of

reached $59.5B and $16B, respectively. against

and

Past

exports had largely contributed

of Philippine exports.

to

Korea

policies the

that

lackluster

Definitely, the Philippines has a

lot

of catching up to do in the next few years.

The new government has increased its intensity in pushing further development

of

the

export sector.

The export drive se_ms

to

be

the

well-

coordinated by the International _Yade Group of the Department of Trade and Industry.

Gains realized in the past, such as the increasing share of

non-traditional diversification,

exports

various

been

exports

incentives

and

greater

maintained and improved

government programs designed to promote

Significant

reforms,

have

to â&#x20AC;˘ total

as

included

like

in

the Omnibus Investment

market

demonstrated

non-traditional

policy changes, like trade liberalization and the

the

in

exports.

new

fiscal

Code,

and

ingtitutional

licensing more common bonded warehouses

and

the

processing center for exports, have been introduced.

one-stop

Notwithstanding these

new developments, serious obstacles to the rapid develolm_nt of the sector still remain.

export


231 First of all, Philippine

exports

competitors,

imported

are

exports

substitute

and above the more

seem to be not accorded For instance,

for the imported general

Another

the Philippines,

the procedural

other schemes.

countries

the

is

protection

not

system

of

those

for intermediate

to compensate

in

to submit a the

inputs

for the anti-export

.import In

relative

than those

In general,

over

of _;s.

for HMWs are simpler

these are more stringent

of

is

complete

to the administration

bond.

located

non-availability

on imports pending

requirements

syst_

except

as regards

This condition

using H_4_s are not required

not enough

the

export

In particular, provide

system

an equal

is generally

credit programs

other

"formula

combination and

BOI/EPZA

bias

some policy

the export

financing

system

the refinancing status

seems

facility

to

of

the

weak

and

of the Central

to indirect exporters.

conservative

be

The

The

guarantee

ineffective.

and institutional

sector.

Bank

commercial

and is collateral-oriented.

are fra%_nented and small. And the credit

has been generally

Thus, support

all exporters

relates

and to post a re-export

lastly,

ineffective.

special

their

system.

And

banking

However,

exemptiondrawback

incentives

does

example

where exporters

of manufacture"

The

vis-a-vis

a free trade status

raw material.

restrictions

liberalization.

of

competitiveness

EPZ are asked to get a BOI certification

domestic

to

their

r_--cdsto be reconsidered.

Thailand.

raw materials.

the

rate policy

losing

specifically

Second,

in

the exchange

reforms

should be

introduced

to


232

A.

Reforms

Many status (1988) (i)

of

the recommendations

for the export and

Rhee

abolish

free imports;

for accessing

currently the

facilities

where

of

input

electronics,

NIST shall regularly

coefficients

update and widely where

requirement

should

be dispensed

countries

wherein

imported. using

certificates otherwise

the

to all

indirect exporters

should

B_s

However, a

thorny

This

to

their

is most

In

such

as

coefficients.

arrive

at

input

trade secrets, in

of manufacture"

food

some

require as

such

the

input mix,

it is even better not to

to submit a "formula

to

issue.

apparent

"item has different

other

may be maintained.

the input

difficult

future.

than

obtained,

the requirement

disseminate

with.

in the

the requirement

easily

have to divulge

almost every Perhaps,

to increase

at

what

of all

other

are doing.

Finally, exporters

All are:

should be provided

remains

it is extremely

all exporters

exporters

tax

is a lot simpler

can be

furniture,

unless

sector

is expected

manufacture"

rattan

commodities

are

in

non-availability

to exporters,

Hence,

to exporters.

coefficients

which

trade

recommendations

(3) replace

such facilities

available

"formula

commodities

export

added.

free

in detail

abolish

These privileges

export value

procedure

in

(2)

a

to enjoy such privileges.

mechanisms

But

discussed

the policy

for exporters;

to zero.

for BMWs

garments,

have been already

to duty

The demand

submit

here to achieve

(4) limit duty exemption

be reduced

that generate

be allowed

The

and

advanced

In particular,

licenses

access

with cash rebates; duty should

sector

(1984).

import

test for gaining

firms

Achie, vin9 a Free Trade Status on the Ex_ort Sector

for

it

be widely

is

imperative

disseminated.

that

incentives/privileges

In our survey,

results

given

to

show that several


233

exporters regard,

were not a_re

â&#x20AC;˘ s_inars/workshops

offices

of

the

exporters' indirect

There

the

exports' is the

financing

share

policy

institutional

â&#x20AC;˘and

to financing.

not prescribed, entire

a generally

economy. policy

external

debt

overhang

domestic

domestic exports

currency

interest

on two counts.

interest

rates

exports.

As

because

of

of competitors shown

the

dc_stic

currency

compared

with

exporters

First,

prevailing makes

could have plowed

percent

given

in

interest

currency.

back to finance

issue

of

loans for

is

the

In

using

view

of

the

the

pressure

pressure

exists,

This adversely

affects

this

rates

many exporters Second,

relatively

higher

export

desirable

reserves,

interest

and also reduces

Chapter

rate for export

Bank

of

2000.

the

is certainly

rate.

moment,

total

up to the year

While

exports

the

to

the c_titiveness

results,

Philippine

those of competitors

five

to remain high.

lessens

high

include

only about

'international

a high domestic

in our survey

to

with

At

the Central

remains strong.

rates are likely

regional

financing.

a preferential

the domestic

and !owgross

be taken

should address

lower interest

to defend

the

to Export Financing

10 percent

As of this moment,

rate

In this

collaboration

requirement

reforms

While

in

by

In our forecast

financing

will not exceed

access

the

comprises

requirements

conducted

however,

Access

requirements.

of post-shipment

to exports.

program.

Automatic

requir_nent

financing

interest

on

should,

in the dissemination

for Assuring

the total export

â&#x20AC;˘ The

Measures

given

Industry

is a need to focus on pre-shipment

post-shipment

financing

of Trade and

associations.

exporters

incentives

should be regularly

Department

B. Reforms.

III,

at all about

export volume

vis-a-vis of

did an more

Philippine not

borrow

overvalued expensive

earnings of

the

which

production.


234 There

is therefore

policies.

It

should

competitiveness

direct

to reconsider

be

noted

the Central

exporters.

It is desirable

to such facility.

would

provide

financing.

For this policy

modernize

the export

elements export

to

purchase

into

domestically intermediate

which

produced inputs

that

(FIL), and

its

access only be

it is expected

exporters

financing

access

to

necessary

to

One of t_e

key

is

value

inputs

disaggregating

added

(DIL),

(iv) purchase

given

that banks

equal

it is however

generate

intermediate

lost

exporters

in the Philippines. export

(i)

has

provides

indirect

and indirect

pre-shipment

those

facility

this policy,

system

peso

rate

1984.

to be effective,

financing

modernizing

loans

imported

With

both direct

rate and exchange

that the Philippine

Bank refinancing

equal access also

the interest

â&#x20AC;˘against the Thai baht since

At present, to

a need

(VAL),

(ii)

(iii)

purchase

domestically

produced

2_V finished

goods

production

financing

for domestic in

(DOL). makes

purchase

the preceding

The separation it possible

two chapters,

The development

automatic

availability

of short-term

VAL

makes

outputs

exporters.

it possible

financed

mechanisms. export banks

It

financing are

overly

Moreover, to make

by export

loans through

(1984).

L/C

L/C

noted have

system

collateral,

with

loan

is the the

fact

status

to from

inputs

or

disbursement

that

creation

a

assures

that one of the main bottlenecks

With

system

of FIL, DIL and DOL

the automatic

in the Philippines

from

As

does not

loans and free trade

the separation

collateral-oriented.

21__/ See Rhee

export

DOL

inputs.

virtually

of the domestic

a quasi-physical

should be noted system

for imported

the Philippines

L/C system.

and

to i_{olement a domestic

and import L/C system

domestic

all indirect

of DIL from FIL

of

in

the

commercial a

quasi-


235 physical credit

collateral, needs

indirect

of

it

all

is hoped

qualified

modernization

of pre-shipment

allay fears of the Central

Bank

its

could

rediscounting As pointed

actual

export

of

window

out by All

order

performance. exceed

The

The

credit

financial

Bank

programs.

of

function,

to

the

direct

or

refinancing

branches

loans

either made

mentioned

small

and

government

export

gone

Philippines

by

credits

banks

of

of export

order.

he

based on FIL,

A loan given

to

monetary

loans would

order

also

access

the

loans, VAL + DIL +

its

an past

cannot

for purchase

export

taxation,

be

responsibility transferred

order.

it

of

would

to

and the Agricultural

government

Loan

to

the

Fund to

the

IGLF should do away

with

anyway,

concentrate

facility

on-lend

managing

IGLF should he transferred

and instead

DBP is in a better position

directly

system could

indirect exporters

into value-added

should

Specifically,

production

can

categories

Such

is not utilized

function.

and

financing

this scheme.

the Philippines.

which

product

should relinquish

Bank of the

Bank

financial

are

the value of the associated

has already

institutions.

Development

The

they

(backed by an L/C) or an expected

easy to implenent

Central

special

export

respond

in losing control

(1988), the basis

DOL cannot exceed

be relatively

export

result

sum of export

Since the Philippines

packing

whether

that providing

the value of the associated

domestic

Land

exporters,

banks

exporters.

The

base.

that cona_rcial

for

its

to implement

exporters.

to exporters

or

falling

in any

of

the

export

credit

programs

guarantee

the

Its

quickly four

on

its

export regional

refinance

export

loan

above.

fragmented agencies

should

not be continued.

managed For

by

non-

efficiency,


236 they

should

be

institution

consolidated

which

has

and

transferred

the comparative

to

advantage

a

regular

in

financial

managing

a

credit

program.

One system

of the key elements

is a strong pre-shipment

in

the preceding

and

ineffective.

all, the

chapter, There

there should main guarantee

define

their

noted

in

oriented

Chapter

plan

provision

of

withdraw

its

converted the

this

to abandon

any

and has plans

it.

sit down

GFSME

First

of

guarantee

to expand

as

together

overlapping.

It to

to was

export-

its exposure

to

••

and interest

should

should be extended

rate subsidy

all its resources

it has been proposed

function,

weak

and Philguarantee

both should

to prevent

its liquidity

Since

earlier

should to

that

pick

the IGLF

be ready

to

up

to both

agricultural

the and

loans.

GFSME

is

view• of

into a regular for greater

only

through,

a

its huge

government autonomy

difficul_t though since

pushes

GFSME

As noted

se_n to be

should be supported.

its guarantee

In

President

relatively

However,

industries

guarantee

present,

corporation.

making

finance

schemes.

to strengthen

right away so that it •can direct

non-agricultural

At

a need

export

programs

V that GFSME has been providing

guarantee.

Thus,

guarantee

guarantee

statement

institutions.

This plan

impl_nented

slack.

is therefore

pre-shipment

finance

the existing

be a policy

agro-processing

•GFSME's

export

own areas of coverage

this sector.

be

of an effective

program

of

LIVHCOR,

responsibilities, corporation

it needs

it is desirable

GFSME

attached

and flexibility.

be

to the Office

of

This

ratio

mother

should

a congressional

that the

•the

is going action.

of

to

be

If ever

government

to


237 private

sector

incorporated

should

of

risks.

GFSME

are

For

the

implement

proposed

of 85 percent

bank

guarantee

small

the

on

all

and

large

(i .e.,

small

size

of the outstanding

principal

Philguarantee

The

task

is to finally which

in

its resources

first

transfer

firms

are

effect

sufficient

finance

for exporters

is a mere

should be

to support

credit earlier

includes

the _165.5M

growth

government

being negotiated

now by the government

used

Philguarantee's

capital.

than

financially

to the

of

National

E.O.

of First

No.

which

and that

is

insured resources

agencies

which

to Philguarantee. from TF.

of EIMP should

64.

Washington

of _400M

from EI)AP and _16.5M in behalf

guarantee

Philguarantee

assets

It is recommended

to

interest.

is

of guaranteed

out be transferred

from EIMP, _20M

it

capital

should

position

rehabilitating

The study

of non-financial

to be phased

and accrued

However,

an additional

a _ealthy

maximum

implementation

increased.

from 1989 to 1993.

programs

suggested

in

a

GFSME

bank similar

is in a better

its non-performing

(1988) has recommended

deemed

industries,

line with

GFSME.

to increase

of

percent

line of _25M per participating

than

export

85

than _5M and medium

incorporated.

Associates

of

Board.

Philguarantee 's definition

is already

Second,

Management

its definition

it

Government

Directors

coverage of

because

therefore

of

agro-processing

terms of flexibility,

weaker

of

Board

of _5M but less than _20M).

export-or.iented

Philguarantee's

In

As regards

should adopt

a bank guarantee

coverage

the

its guarantee

those with assets of less

those with assets

GFSME

maintain

credit

enterprises, firms

in

GFSME be the same as the present

GFSME types

representatives

we This

The 짜5B

instead

be


238

The from

maximum

guarantee

70 percent

coverage

of outstanding

of Philguarantee

should

be

increased

credit

to 85 percent

to align

it with

that

was given

the authority

to grant

guarantees

of GFSME's.

Recently, less

than

President

to

_50M

per

beneficiary

of the Philippines.

Annexes credit

Philguarantee

D

and E.

guarantee

institution,

commercial

exporters.

It have

has been

two private

president

recovering

strengthened

further

collections.

GFSME should

Whether

be

be

and

of Directors

it

from

should

to do away

be

open

division

This

is important

exporters exporters,

of

along

the lines

loan default,

association particularly

especially

GFSME

in building

with

reduced

preferably

one

association

of

loan

recoveries

directly be

take

the

continued

to manage

and

claims

accredftation

to endorse

an

a profile

and

medium-size

the

banks.

To

should

Bank,

facility

loan

financing

above.

of

guarantee

export

if the export

and Philguarantee

of

of the Central

the export

suggested

the small-and

has

such division.

InStead,

to all banks who wish

modernized

occurrence

institutions.

export

should be

that

This

likewise maintain

in

desirable.

to

a separate

the

structure

the

started

loans.

truly

representatives, one

of

as shown

a

organizational

banks are stable or not should be the concern

guarantee. to

by having

worthwhile

not that of guarantee should

up new initiatives

is definitely

when

approval

towards becoming

sector

system

tremendously of

would

itself

the

shown in the case of Philguarantee

improved

It

lined

Philguarantee's

banking

A full-time

responsibility

seeking

The number of the Board

from seven to five, with the

Ithas

As it prepares

be overhauled.

from

without

of

for

system

minimize link

up

creditworthiness exporters.

a is the

with of

Exporters


239 know

very

well

exporters

As

be

recommendations

gathered

have

improving

focused

the guarantee

financing does

reproduced

the figures

also estimated

1989

to

2000

â&#x20AC;˘depreciation these

system.

These

assigning

a

At

is

that

the

problem.

banks'

becoming

direct

them through

14 percent

suggests

cover the d_nand such resources

collateral

and are considered

above,

growth

sub-

national

as well

level,

as to

export we

have

requirement.

We

loans and discounts

for

financing

rate

and

a 22/

four A

that the

resources

for export

financing. the

who typically

risky

the

bottlenecks

tDe U.S. dollar.

and medium-exporters

of

reforms

major

have not flowed to

highly

most

In Table VII.l,

outstanding

rate of the pesoâ&#x20AC;˘ vis-a-vis

the small-

percent

comparison

of

_rcial

The

problem,

export

sector,

have

insufficient

the country

in its export

by banks.â&#x20AC;˘

Scoi_e for ADB Assistance

There are some areas by which ADB can assist One

Goverr_nent. is

with

are the

for pre- and post-export

especially

drive.

for

and institutional

earlier.

co_aercial

can very well

C.

contact

discussion

on policy

two sets of figures

however,

the

not seem to be a major

have

banks

potential

in constant

from

identified

financing

of

the

or other means.

may

export

who have

since they have been

contracting

on

producers

hostile

is

to

continue

The export towards

it.

its

policy

sector cannot

dialogue

thrive well

The discussions

should

with

the

if the policy

Philippine environment

focus on the ways by

which

22__/ The 14 percent was the average growth rate of loans and discounts during the period 1980-84 (see Table V.5). The years 1985-87 were excluded because of the abnormal drop in loans and discounts during this period that was mainly brought about by the transfer of non-performing assets of the Philippine National Bank to the National Government.


240 Table VII.I BANKS' LOANS AND DISCOUNT, AND POST-EXPURT FINANCING

PROJECTED AND PRE-

Pro3ected Exchange Rate (P/US$) i/

Year

1989 1990 1991 1992 1993 •1994 1995 1996 1997 1998 199_ 2000

Banks' Loans and Discounts

21.93 22.81 23.72 24.b7 25.66 26.69 27.75 28.86 30.02 31.22 32.47 33.77

2/

4.7 5.1 5.6 6.1 •6.7 7.4 8.1 8._ 9.7 10.6 £1.7 12.8

Pre- and Post Export Financing Requirement 3/

1.15 1.29 1.45 1.65 1.92 2.26 •2.62 2.97 3.40 3.85 4.37 4.95

i/ The

assumed

depreciation

rate

is

the

rate

4 percent

per

2/ Assumed

to

De

growing

3/ From

Table

VI.9.

at

of

14

percent.

year.


241 exports

can

provide the

be given

the Philippine

pre-shipment

directed

to

private

export

_echanisms

committee

who

pre-shipment

Still

desire

financial

another

assistance.

export

The technical

assistance

know-how

of the staff of these guarantee

would

include

procedures regards

improvement

for applications

financial

long-term

soft

assistance,

privatized.

development

aimed

in

and claims,

ADB may either

and Philguarantee.

Investigation

Bureau

and

involved

in the the

in

its

with technical

and

country

directed

at

involves

programs.

This

processing

and litigation. invest

in or

is now

As

provide

Additionally,

(CIB) which

two

the technical

The other

dissemination,

directly

be

agencies

formulate

at improving

and collection

to

of

the guarantee

{nformation

should

the progress

may be

institutions.

for delivering

loans to both GFSME

may buy shares of the Credit

and monitor

and Philguarantee

One is human resource

in the procedure

system,

ADB can assist the

levels.

improvement

issues

is

modernizing

assistance

the

financing

area

in

government

study

such program,

both GFSME

The

various

will

Another

assistance

system.

way by which

is toprovide

status."

with technical

representing

associations

the

neutral

financing

for implementing

program. export

Government

export

a

modernizing

an "extended

ADB being


243 REFERENCES

Ali,

Ifzal. "Manufactured Exports from the Philippines: A Sector Profile and an Agenda for Reform." Asian Develoi:rnentBank Economic Staff Paper No.4,

September

1988.

Balassa, Bela. "Exports and Economic Growth: •Further •Development." Journal of Development Economics. Amsterdam, Netherlands: Elsevier Science • Publishers •,June 1978. Bnagwati, Jagdish. Anatomy and Consequences of Exchange Control Cambridge, Massachusettes: Ballinger Publishing, 1978. Department of Trade and Industry. 4), 1988. First

Philippine

Exporters'

Manual

Washington Associates. "Report on Philippine Structure." Prepared for the Industry and Energy Region, the World Bank, September 1988.

Regimes.

(Vol_aes

i-

Export Finance Operatlon Asia

Gregorio, Rosario G. "An Economic Analysis of the Effects of Philippine Fiscal Incentives in the Philippines." Industrial Promotion Policies in the Philippines. Makati: Philippine Institute for Development

•Studies, 1979.

Krueger, Anne. • FOreign Trade Re_imes and Economic Development: zation Attempts and Consecluences. Cambridge, Massachusettes: Publishing, 1978. Lamberte, Mari0 B. "The Impact of Special Credit Programs for •h_loyment and Productivity." Unpublished Monograph, 1989.

LiberaliBallinger

SMEs

on

Lapar, Ma. Lucila A. and Douglas H. Graham. "Credit Rationing Under a• Deregulated Financial System." PIDS Working Paper Series No. 88-19. Makati: Philippine Institute for Development Studies, October 1988. Magno, Marife and Richard L. Meyer. "Guarantee Sche_nes: An Alternative to the Supervised Credit Program." PIDS Working Paper Series No. 88-23. Makati: Philippine Institute for Development Studies, October 1988. Manasan, Rosario G. "Impact of BOI Incentives on Rate of Prices and Relative Factor Use: A Comparative•Analysis Under the Omnibus Investments Code of 1981 (P.D.

Return, Factor of Incentives 1789) and the

Investment Policy Act (B.P. 391)." PIDS Staff Paper Series No. 86-01. Makati: Philippine Institute for Development Studies, 1986. . "A Review of Investment Incentives in ASEAN (A paper presented at the Federation of ASEAN Econallic Conference, Penang, Malaysia, November 17-19, 1988).

Countries." Associations

Medalla, Erlinda. "Assessment of the Tariff Reform Program and Trade Liberalization. PIDS -Tariff Commission Staff Paper Series No. 86-01. Makati: Philippine Institute for Development Studies, 1986.


244 t, Michaely, M. Expotr and Growth: An Empirical Investigation." Journal of Development Econ_nics. Amsterdam, Netherlands: Elsevie_ Science Publishers , March 1977.

National Statistlcs Offlce. Forg_gn 1975_1987. Manila, 1975-1987.

Trade

Philfoodex

Food Exporters

News.

Manila:

Philippine

Statistics

of the

January

Philippines

1989.

Power, John H. and Erlinda M. MedaIia. "Trade Liberaliza_onoin the Philippines: Assessment of Progress and Agenda for Future Reform." PIDS-Tariff Commission Staff Paper Series No. 86-01. Makati: Phiiipplne Institute for_Deveiopme_tudies, 1986. _' ........ Power, John H. and Gerardo Sicat. Trade Policies". New York:ISf0rd Presidential

Action

Center

for Trade

The Philippine Industrial_zgtion and Union Press," 1971_ ..........

Facilitation,

Export Credit Insurance: A. Dynami_ Approach the Philippines. Manzfa,i5 September 1988.

Office

of the President.

to Ex_ort

Development ....

in

Rl_ee, Yung Wee. Framework for Export Policy and Admiqi@tration: Lessons from the East Asian Experience. WaShington: The World Bank, 1984. Tan,

Norma. "The Philippines." Makati:

Structure of PrOtection and Resource Flows in the Industrial Promotion Policies in the Philippines.

Philippine

The World Bank.

Institut e for Development

The Philippines_

Fina.ncial Sector

Studies,

1979.

Study. August 23, 1978.


245 Annex

LIST

I.

2.

3.

4.

5.

6.

7.

8.

9.

10.

ii.

12.

13.

14.

15.

OF

PERSONS/INSTITUTIONS

Mr. Armando Tetangco Director, DER-International Central Bank of the Philippines Ms. Purita Neri Director, DER-Domestic Central Bank of the Philippines Ms. Cecilia Arguelles Director, Loans and Discounts Central Bank of the Philippines Mr. Jose Tirona Director

VISITED

Department

Export Department Central Bank of the Philippines Mr. Jesus Ta_edo Executive Vice-President Philippine Mr. Manuel

Export and Batallones

Manager, Export Credit Philippine Export and Ms. Evanor Palac Assistant Director

Foreign

Loan

Guarantee

Corporation

Guarantee Corporation Foreign Loan Guarantee

CorpOration

.

Business Development and Marketing Group : Guarantee Fund for Small and Medium Enterprises Dr. Gloria Arroyo Undersecretary Department of Trade and Industry Mr. Victor Lim Vice-President Financial Executive Institute of thePhilippines Atty. Jose Hisamoto Officer-in-Charge Philippine Exporters Ms. Clara Lapus President Philippine Federation Mr. ReynaldQ Vergara President

Foundation

of

Food

Exporters

Philippine Chamber of Handicraft Ms. Dalisay Director Purchase Order Financing Mr. Manuel Colayco Executive Vice-President

Industries

Philippine International Trading Mr. Tony Honrado Assistant Managing Director Export Industrial Modernization Tecnnology & Livelihood Resource

Corporation

Program Center

A


246 16.

17.

18.

Mr. Nestor Director NEDA Region Mr. Ernesto Director

Mijares VII Balangue

NEDA Region XI Mr. Arnel Salva Division Chief Trade

Promotion

Bureau of Export Trade Ms. Minerva Franco Executive Director

Promotion

20.

21.

Product Development and Mr. Alfonso Villaverde Executive Director

19.

22. 23.

24. 25.

26. 27. 28.

29.

30.

Bureau of Export Ms. Ria Ramirez

Philippine Ms. Lina

Shippers' Batallones

Design

Center

of

the

Philippines

Council

investment One-Stop Action Ms. Becky Estalilla Marketing Manager Credit Information Bureau, Mr. Conrado San Juan APEX Financing Ms. Zeny Galatera Director

Center ,_ Inc.

Export Development Assistance Program Technology and Resource Livelihood Center Ms. Leny Abe!la Exponet Ms. Helen Alvarez International Coffee Organization Ms. Ma. Angelina Angeles Deputy Executive Director Philippine Trade Training Center Ms. Gigi Quiazon Office of Policy Research Department of Trade and InduStry Ms. Plavia Tan Assistant Director Loans and Credit Central Bank of

Department the Philippines

- Certifying

Agency


247 "

Annex

B

Organizational Chart D_.,_,,_To__D_._,DZ,_USTR_

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248

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249

.


250 _nnex .1PHIL_PPll_E 5th

Tloor,

£xec_tlve

EXPOrt

_

Building

Center, T_n. Gil _. )takati, Metro Man£1a

FOREIGm LO_

_

E

CZ)RPO_TIOI_ l_yat

STATEMENT O_ _O_ME ARD _SES For The Three _uarters Ending _ept-_her {Unau_Lited}

Cozier

ttaka_

&venue

_0, 1988

INCOME Guarantee and Commitment Fees Interest on Investments an8 Deposits Processing and other Fees ana Charges Lease Income GFI-Linked NPAs GROSS

P I0,344,553._5 20,841,.5.52.70 13,693,588.55 I_,205,391.68 17,549,596.62

INCOM_

P 77,634,682.80

OPERATING EXPENSES Salaries and Other Vtilities Professional Fees

Personnel

Expenses

P

Depreciation - Equipment Other Operating Expenses GFI-Linked NPAs TOTAL OPERATZNG

OPERATING INCOME EXTRAORDINARY Foreign

106,5%3.89 84¢,079.42 .15,017,845.65 21_,922,621_-46_

EXPENSES

(LOSS) BEFORE ITEMS

Exchange

P 55,712,061.34

Gains

Interest and Financial Regula_ GFI-Linked NPAs

NET I4_OME

3,515,992.83 1,692,778 _84 742,410.83

256,489.18 Chax_es P 4_,712,420.25 _74,_95,222.95

220 [907 _643.20

(P164,939,092.68)

(LOSS)

Executive

Vice

President


251

Annex PHILIPPINE 5th

Floor,

EXPORT

Executive

AND

Building

As

_OREIGN

LOAN

GUARANTEE

Center, Sen. Gil J. Makati, Metro Manila

of

BALANCE SHEET September 30, (Unaudited)

Puyat

E

(Cont'd.)

CORPORATION Corner

Makati

Avenue

1988

ASSETS Current

Assets

Cash and Due From Banks Short Term Investments Guarantee Fees Receivable Accounts Receivable (Net) Prepaid Expenses Total

Current

Investment Fixed

in

_ (Net)

Assets

Government

_ Securities

347,348.38

Other

Receivables

on Guaranteed Loans Other Advances Acquired Assets Contract Mortgage Receivable Debenture Bonds Notes Receivable Miscellaneous Assets Assets for Transfer to National Government Total

Other

ASSETS

246,222,057.18 31,471,283.56

Assets

Other Assets Advances and

TOTAL

6,734,126.18 220,711,787.99 5,248,590.39 1,280,305.28 12,247,247.34

_

328,308,249.42 947,908.97 521,598,570.21 163,100.00 194,296,135.87 94,123,000.00 522,902.85 5,493,233,137.56

Assets

6,633,193,004.88

/6,911,233,694.00


252 Annex LIABILITIES

AND

Liabilities Current Liabilities Liabilities for

STOCKHOLDERS'

Transfer

National Government Income Tax Payable Interest PayaDle Accounts Payable and Liabilities Total Advances

Current from

National

Long

Term

132,015,544.14 89,149,205.31 24,541,312.14

Other 11,631,878.91

National

_

Treasury

257,337,940.50

_

332,442,039.87

_

488,918,160.99

Treasury Transfer

Government)

Liabilities

National

_

816,891,711.30

Transfer

Government

Total

Long

Total

Liabilities

Deferred

to

Liabilities

Loans Payable Liabilities for to

Term

2,653,951,588.81

Liabilities

23,470,843,300.11 _4,549,541,441.47

Credits

10,746,594.02

Deferred Credits (related for Transfer to National

to

NPAs

Government

149,801,525.03

Stockholders' Equity Capital Stock (Authorized and Subscribed - PI0._B) Retained Earnings (Deficit) Profit (Loss) Total

TOTAL

(Cont'd.)

E_UITY

_

Advances fromNational (related to NPAs for to

E

Stockholders'

LIABILITIES

AND

_3,230,438,657.00 ( 864,355,430.84) ( 164,939,092.68)

Equity

STOCKHOLDERS'

2,2_i,144,133.48

E_UITY

_6,911_233,694.00


253 Annex EXPORT CREDIT FOR SMALL AND

GUARANTEE PROGRAM MEDIUM INDUST•_IES

BANK.GUARANTEE

PURPOSE

:

F ••

LINE

To raise the level of preshipment financing available and accessible to creditwortny but collateraldeficient small and medium-size export enterprises. To simplify and facilitate the delivery of financial assistance guarantee support to deserving

CONCEPT

:

and exporters.

Philguarantee shall, in addition to •the existing Individual Account Guarantee Facility, extend Bank Guarantee Lines in favor of private banks participating under the ECGP-SMI. Subject to conditions embodied in a new agreement, Philguarantee shall delegate authority to participating banks to •• approve and grant preshipment credits to small and medium-size exporters secured • by the guarantee of the corporation.

ACCREDITED ••

BANKS

:

Citytrust Banklng Corporation Far East Bank and Trust Company Philippine Commercial International Pi!ipinas Bank Rizal COmmercial Banking Corporation SolidbanK Corporation•

Bank

GUARANTEE•LINE

:

2"25 Million per participating bank renewable annually for the same amount based on the bank's overall performance in the ECGP-SMI.

GUARANTEE

COVERAGE

:

Maximum of 70% of the principal and accrued

GUARANTEE

FEE

:

1.5%

PERFORMANCE STANDARDS SANCTIONS

AND

:

per

Past due Otherwise, matically A default Otherwise, matically

outstanding interest

annum ratio must not the facility suspended.

exceed shall

20%. be auto-

ratio must not exceed the 10%. the facility shall be autoterminated.


254 Annex ELIGIBLE

GUARANTEE

LOAN

CEILING

UTILIZATION

MINIMUM COLLATERAL REQUIREMENT

Preshipment Export Credit granted against irrevocable letter of credit or acceptable confirmed purchase order

:

Small

enterprise

- maximum thousand

enterprise

BORROWERS

:

Purchase of inventories, other operating expenses export orders

:

Assignment credit or

:

OWNERSHIP BUSINESS

TRACK

RECORD

FINANCIAL

CREDIT

STANDING

RECORD

of

ivl.5

payroll and to service

of irrevocable letter of confirmed purchase order in

their

personal

A small or medium-size export enterprise with total assets of at least P500 thousand but not exceeding _w'i0 million Majority-owned

ACTIVITY

of _6500

- maximum million

JSS of principals capacity QUALIFIED

(Cont'd.)

:

Medium

LOAN

F

Filipino

firm

:

Processing, production or manufacturing and marketing of non-traditional products directly for exports

:

At least one (i) or 4-5 negotiated a total value of

:

a.

Unimpafred capital of (net of pre-operating

b.

Debt-Equity financing

:

year export performance shipments with at least $100 thousand

ratio

of

_250 thousand expenses) 80:2_

after

Satisfactory credit dealing as certified by past/present creditors for the enterprise and its principals No derogatory prise and its

findings principals

for

the

enter-


255 Annex PROPOSED

OBJECTIVE

:

GUARANTEE FOR OVERSEAS

To facilitate contractors their

CONCEPT

:

in

ASSISTANCE CONTRACTORS

bonding order

G

PROGRAM

for POCB-accredited for tBese firms to

competitiveness

in

service

maintain

exports.

Pnilguarantee shall provide guarantees to a pool of selected/pre-qualified POCBregistered overseas contractors who are encountering difficulties due to the rather stringent collateralpolicy of most banks. These contractors have been successful in their ensure

undertakings that these

and the program accomplishments

aims to continue.

PROPOSED SCHemE

:

i.

2.

Project

Qualified

under

tne

Program:

*

Labor Subcontracts to established foreign contractors (i.e. Japanese, U.S., Italian, Korean) as determined by POCB;

*

Officer (OrCC)

Ou_ified

In Charge Projects.

of

Construction

Contractors:

Some ten (10) qualified firms shall be chosen among the "surviving" POCB registered contractors. The selection process to be undertaken in close coordination with POCB shall be based on the following factors: *

Historical per POCB

*

Accreditation

*

Contracting Ability based on Net Worth, Finished/Ongoing

*

Dollar to be

*

Credit

Net FX Records with

Remittance generated Record

by

Remittance

POCB of the firms Projects

and Employment the Project


256

Annex 3.

Types

of

Guarantee

G

(Cont'd.)

Available:

Performance Bond, Advance Payment or Peso Working Capital for Mobilization Expenses 4.

Guarantee Ceiling: $5_0 Thousand maximum exposure to each qualified contractor; P100.0 Million ceiling on all issuances under this program.

5.

Guarantee

Coverage:

The total guarantee requirement of the firm shall be shared proportionately among Philguarantee, Bank and the Contractor in the following manner:

6.

*

50%

Philguarantee

*

25%

Bank

*

25%

Contractor's Contribution

Collateral

Equity

Requirement:

Pnilguarantee's exposure shall be secured by the assignment of_.contract proceeds plus the JSS of company's principals. Any other collateral held by the bank shall be shared par ri-passu with Philguarantee. 7.

Fees: Commitment

Guarantee

Fee

Fee

-

1/4 of 1% p.a. commencing on the 90th day upon approval.

- Minimum p.a.

of

2.0%

A Study of the Export Financing System in the Philippines  

WORKING PAPERSERIES NO.89-12 NTHEPHILIPPINES June1989 PhilippineInstituteforDevelopmentStudies

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