MANILA -- The Philippines should explore other markets and diversify its product lines to shield itself from the effects of trade protectionist policies recently adopted by some countries.
On the sidelines of the Institute of International Finance seminar at the 51st Annual Asian Development Bank (ADB) Meeting here Thursday, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo told reporters that market and product diversification will prepare the country for the possible collateral impact arising from trade tensions between the United States and China.
Guinigundo said the Philippines, along with other countries trading with China, may not be directly affected should the US government impose higher duties on Chinese products, but a “spillover effect” will likely be felt.
The central bank official added that since China is a transshipment point in the region -- wherein China imports semi-finished products from different countries including the Philippines, then export the finished products either to the US or Europe -- China’s “propensity to import” will be affected.
“But that’s not the only problem. It can also extend to direct investments and portfolio investments. That is something we need to look at more carefully,” said Guinigundo.
However, he noted that diversifying into other markets and products cannot be done overnight.
“Market or product diversification can take time, and therefore such diversification steps can only affect your future exports or imports,” said Guinigundo, adding that companies cannot abandon the production of goods since orders were in place six or 12 months ahead.
On the other hand, the growth of Philippine services exports to the US remains “good”, according to the BSP official.
This is amid the pronouncements of US President Donald Trump that he wants to keep jobs at home, discouraging the outsourcing of business operations.
Guinigundo mentioned that some existing business process outsourcing (BPO) companies are hesitant to expand operations here, uncertain if the Trump administration would pressure American BPO companies “to bring the jobs back home.”
Industry data showed that 70 percent of the demand in the contact center sector came from North America, with the bulk of the demand coming from the US.
Meanwhile, part of the Philippine Export Development Plan 2018-2022 is to diversify the country’s export markets by banking on trade preference programs where the country is a beneficiary, as well as free trade agreements (FTAs).
Aside from the US, the Philippines benefits from trade preference programs from the European Union and Russia, while having FTAs with the 10 ASEAN member states, Japan, and European Free Trade Association states Iceland, Liechtenstein, Norway, and Switzerland.
Manila is the host country of the 51st Annual ADB Meeting. (PNA)
