THE Foreign Buyers Association of the Philippines (FOBAP) has urged the government to provide loan financing to micro, small and medium enterprises (MSMEs) exporters.
In a statement released last Friday, the Fobap also asked the government to support MSMEs to enable them to comply with international trade regulations required by foreign buyers.
This call came after executives of William E. Connor & Associates Ltd. (WE Connor) visited offices of five vendors who cited payment terns as a main challenge in business.
“Many of the vendors require down payments, which almost none of our clients are able to provide,” WE Connor executive and Fobap Vice President and Director Tet Jarviña said. “Factory audits pose also a challenge for vendors with no existing facilities.”
Still, Jarviña said WE Connor is “trying to work our way around these challenges by identifying selected clients that will be a good match to their terms, designs and capabilities.” The Hong Kong-based WE Connor is in the business of wholesale distribution of non-durable goods.
Lacking financing
JARVIÑA added that many of the exporters or vendors, particularly the new ones, lack financing. She said down-payment is not a payment term these US clients would accept; very few if any on special cases.
“The usual payment term is really 60 days telegraphic transfer. So if the government can help in the financing, that would help a lot,” the Fobap official said, underscoring support especially for exporters who are just starting in the business.
Further, Jarviña said some of them are also struggling to comply with international trade regulations required, particularly by the US clients.
“The profile of the market is changing, many of our clients are looking into corporate social responsibility, sustainability,” Jarviña said adding some markets look for wood that is certified by the Forest Stewardship Council (FSC).
“We don’t even have a species of wood that is FSC certified. We don’t even have a wood factory that is FSC-certified so we had a lot of catching up to do.”
Amid the downpayment and social compliance issues, Jarviña said only three out of the initial dozen vendors could possibly serve up to 10 US clients.
Laws, re-planting
FOBAP President and Chairman Robert Young, meanwhile, is banking on the passage of a bill ramping up lending to MSMEs affected by the Covid-19 pandemic.
House Bill (HB) 1, or the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery or (Guide) Act, seeks to provide Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) funds to expand their loan programs for these MSMEs.
Young said the bill, if passed, “will help MSMEs engaged in handicrafts and other hard goods and suppliers, vendors who need financing.
“Even this downpayment [issue]will be solved, and this will start to reignite the hard goods industry,” he added.
Young said financing support benefits MSMEs, especially the micro companies, which act as suppliers of the semi-finished or final product to the bigger exporters who do the final shipping.
Jarviña also underscored the need to reduce the cost of doing business in the country to make export prices competitive.
“Even with the cost of raw materials, how can we get these prices to be reduced? Then [there are also] incentives [for exporters]. Vietnam, Indonesia have many incentives for their exporters,” she said.
Jarviña said there is also a need to cut the costs of transportation, power, labor, and product testing, among others, as well as facilitate the ease of doing business in the country.
Young is pushing for the re-planting of raw materials that are being exported.
“We really have to start again from scratch. We have to plant again this abaca, sinamai and all kinds of materials supporting the product,” he said.
Opening more
MEANWHILE, Manuel Melgar, general manager of PhilDansk International Corp., said other countries continue to buy from the Philippines.
“Our [foreign] buyers can grow, they can still buy if we have more capacities [of production] to open; more factories to open,” Melgar said.
Two weeks ago, Philippine Exporters Confederation Inc. (PhilExport) President Sergio R. Ortiz-Luis Jr. told the BusinessMirror that the government should give interest-free and no-collateral loans to MSMEs.
Ortiz-Luis said the government needs to come up with “out-of-the-box” solutions to rally merchants into contributing to the economic recovery path.
Ortiz-Luis noted that in order for the MSMEs to generate jobs, it has to be spared from the traditional and cumbersome lending process that makes these merchants go through a series of steps and fees.
He emphasized that the government should consider lending for MSMEs as an investment rather than an expense.