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Philippines: Potential Asian Powerhouse?
By Joy F. Canono
There’s a burgeoning
market for U.S. agricultural exports now that the Philippine
government has implemented trade reform, liberalized foreign
exchange and reduced tariffs.
This many-island nation of 73 million has been enjoying overall economic growth that has translated to a gross domestic product (GDP) growth of 5.8 percent in 1997--with a per capita income of $1,159--and a growing middle class that is eager to sample exotic foods. Especially U.S. food products that now make up 80 percent of the imported consumer-ready food products market in the Philippines.
The Philippines was the largest Southeast Asian market in 1997 and ranked 15th among the leading agricultural markets of the United States.
Despite currency devaluation and the general economic crisis in Southeast Asia, U.S. agricultural exports in 1997 to the Philippines were down just 2 percent compared to 1996. Of particular interest--imports of consumer-ready foods over the same period were up over 21 percent, exceeding previous highs.
The overall slowdown of imports is expected to linger through this year and will likely be influenced by the future value of the Philippine peso and the continuation of economic reforms.
While today may not be the best time for product sales, it is an ideal time to establish contacts within the Philippine market through trade servicing and market development efforts.
WTO Affects Import Policies
As a signatory to the World Trade Organization (WTO), the Philippines has lifted all quantity restrictions on imported food products except for rice, which can be purchased only through the government’s National Food Authority. However, tariff-rate quotas are in effect on some products.
The Bureau of Food and Drug (BFAD) enforces laws pertaining to manufacture and sale of food, drugs and cosmetics in the Philippines. These rules generally follow the U.S. Food and Drug Administration policies and guidelines, which eases the U.S. firm’s task of figuring out labeling requirements.
Before product registration, the exporter needs a License to Operate from BFAD. The License lists names of foreign suppliers or sources of the products being registered.
BFAD registers all imported products only through Philippine importers, who guide exporters through this extensive process. For some items, exporters must also supply documentation or product samples.
The Certificate of Product Registration (CPR) issued by BFAD is valid for two years and can be renewed for another three years.
Import Regulations for Fresh Foods
Before fresh fruits and vegetables and meats and meat products
can be imported, quarantine phytosanitary clearances that double 
as import licenses are required.
The Bureau of Plant Industry (BPI) regulates imports of fresh fruits and vegetables. Shipments must also be accompanied by a USDA Phytosanitary Certificate issued at the port of origin.
Fresh fruits from Florida and Texas are currently prohibited due to fruit fly concerns.
Even though all restrictions on imports of fresh vegetables were lifted in 1995 as part of the Philippines’ Uruguay Round commitments, vegetable imports are still limited--phytosanitary protocols have thus far been defined only for potatoes, onions and garlic.
The Bureau of Animal Industry (BAI) regulates imports of meats and processed meat products. A Veterinary Quarantine Clearance (also serving as the import permit), must be secured from BAI for each shipment.
Only meat products from plants in the United States that are accredited by USDA’s Food and Safety Inspection Service (FSIS) can enter the country; these shipments must also be accompanied by an FSIS certificate. Processed meat products also require registration with the Philippine BFAD.
Tariffs and Tariff-Rate Quotas
In line with its WTO and Association of
Southeast Asian Nations (ASEAN) commitments, the Philippines has
restructured tariffs for industrial products and some
agricultural products. Most tariffs will be reduced to 5 percent
or less by 2004.
The Philippine government has contracted with a Swiss firm to conduct pre-shipment inspections at port of origin for shipments valued at $500 or more. The inspector places a value on the shipment, which is the basis for future taxation and tariff rates. Many exporters have complained about over-valuations.
The Philippines has committed to using the more widely accepted transaction value as the basis of taxation by the year 2000.
Make Friends With Your Importer
Philippine importers, who often maintain a buying agent or offices in the United States to consolidate orders, cater to the needs of both retail and food service customers.
Most major importers are based in the Manila area where 90 percent of all food imports enter. Goods are distributed via trucks and inter-island vessels. The infrastructure is not advanced, and refrigerated trucks are scarce.
Some bigger companies maintain smaller distribution centers in other cities, particularly Cebu City, second only to Manila as a trade center.
The food retail sector has a lot in common with those in neighboring countries. Western-style supermarkets, favored by the urban middle class, carry a wide selection of imported food and beverage products. Even traditional street markets and corner mom and pop stores carry imported products.
Convenience stores are a part of the urban scape in all major cities. And wholesale buying centers have made a recent appearance; these companies are likely to have their own importers.
A unique retail situation exists with
the duty-free stores that sell mainly U.S. products. But act
fast--they’re expected to slow down as the reduction in
tariffs induced by WTO agreements kick in and as shopping
privileges are being limited.
Exporters should be prepared to fully support their Philippine partners with marketing and promotions and visit at least once a year.
Packaging should be sufficient to deal with heat, humidity and occasional less- than-perfect handling.
There’s no substitute for market research to tap into consumer preferences. Some tips: Philippine consumer have an affinity for sweet products and a fondness for cheese and barbecue flavors in savory snacks. And the product will sell better in smaller consumer packs for affordability.
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The author is a marketing specialist with the FAS Office of
Agricultural Affairs at the American Embassy in Manila. Tel.:
(632) 895-4708/9536; Fax: (632) 890-2728; E-mail: Canonoj@fas.usda.gov
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