A POSITION PAPER OF
THE CONFEDERATION OF PHILIPPINE EXPORTERS
(CEBU CHAPTER ALSO KNOWN AS PHILEXPORT CEBU)
ON THE
PLANNED PROHIBITION IN THE TRADING OF
TAX CREDIT CERTIFICATES (TCCs)
INTRODUCTION
The Confederation of Philippine Exporters Foundation (Cebu), Inc., represents nine (9) export sectors in the Central Visayas region, namely: electronics, industrial goods, furniture, seaweed, food, fashion accessories, gifts, toys & housewares, garments and medical tourism. It is the umbrella organization and the voice of the entire export industry in the region. The whole export sector provides employment to hundreds of thousands of workers in the region.
BACKGROUND
The Philippines, in order to compete globally with other countries for foreign direct investments (FDIs) as well as promote itself as an ideal investment destination, has offered several incentive packages such as tax holidays, duty-free importation of capital equipment, VAT-free purchases, hiring of foreign nationals, and other perks that are covered under the Investment Priorities Plan (IPP).
Companies who are entitled to tax refunds and drawbacks are issued TCCs by the Board of Investments (BOI) and the Department of Finance (BOC and BIR). It has been a usual practice for these companies to trade their TCCs in the secondary market in order to generate cash flow. TCCs sold in the secondary market are normally discounted at around 15% to 30% of face value to attract buyers.
The Confederation of Philippine Exporters in Cebu has since 2007 lobbied for the cross application of TCCs issued by the DOF through the BOC and BIR. The petition of exporters was dismissed by two administrations as "too tedious" and virtually too complicated to administer.
The current BIR Chief Kim S. Jacinto-Henares, in the June 7, 2011 issue of Business World (BW), was mentioned as "seeking to prohibit the trade in tax credit certificates (TCCs) to ensure that only qualified firms get to enjoy the tax breaks." She was further quoted by the paper as saying "The exemption is personal to the taxpayer. Why should they be able to pass it on to other people?"
A good example presented by the paper was the case of the big oil companies who were reportable able to paying up to P10.5 billion in excise taxes in 2010, using TCCs bought from the garments industry.
THE ISSUES
1) There is a long wait in securing TCCs and tax drawbacks;
2) Cash-strapped companies will have difficulty in generating cash flow; and
3) Companies lose more when TCCs are bigger than the tax obligations.
THE CHALLENGES
There are signs that the United States might suffer a double "dip recession" based on vital economic indicators covering the month of May 2011 i.e. jobs data, consumer confidence, factory orders, etc. Even President Barrack Obama admits it openly that the recovery has slowed down and the possibility that the US economy might experience negative growth for the second quarter of 2011.
In the Philippine situation the Export Development Council (EDC) reported that exports flattened in the first quarter of 2011 at US$12.2 billion against last year's US$11.3 billion or only a 7.8% uptick, much lower that the quarterly average of 42% last year. There are worrying signs as exports at the One Stop Export Documentation Center (OSEDC) continue to slide at the rate of 12% per month.
SME exporters who do not have access to financing pay very exorbitant rates to usurpers and quasi credit institutions for their working capital in addition to generating cash out of their TCCs by selling these in the secondary market.
The US dollar which analysts predict to continue to devaluate vis-à-vis the PESO will put added pressure on exporters' bottom lines in the next 12 months (it is currently ranged bound between P42.50 to P43.50).
The continued rise is fuel prices, labor costs and electricity bills will increase production costs of exporters and put a lot of pressure on their respective margins.
APPEAL
In view of the circumstances stated above the Confederation of Philippine Exporters in Cebu hereby pray for the following:
a) That the Department of Finance consider our appeal for "cross application" of the tax credits of exporters to be offset against BIR and BOC tax obligations;
b) That the planned prohibition in the trading TCCs in the secondary market be suspended until such time a workable and an equally advantageous alternative for exporters is found;
c) That the current timeframe in the issuance of these TCCs be shortened in order for exporters to general additional cash flow for their working capital requirements; and
d) That TCCs may be used by the bearers as collateral for short term credits with banks (in case of defaults banks should be able to use the TCCs to offset their own tax obligations).
CONCLUSION
Our sector is one of the main drivers of the Philippine economy and one of the biggest employers of the country. We wish to quote the provisions of Section 2 of the Export Development Act of 1994, which states:
"It shall be the policy of the State to evolve export development into a national effort. The government shall champion exports as a focal strategy for a sustainable agri-industrial development to achieve Philippine NIChood towards the year 2000. The private sector shall take the lead in the collective effort to promote exports through discipline and hard work, as it confronts the challenge of winning international markets.
The government and the private sector shall jointly transform the Philippines into an exporting nation. Towards this end, the State shall instill in the Filipino people that exporting is not just a sectoral concern, but the key to national survival and the means through which the economic goals of increased employment and enhanced incomes can most expeditiously be achieved."
Signed on 8 June 2011, in Cebu City, Philippines.
VENUS C. GENSON
President- Philexport Cebu
Umbrella Organization
ANGELA F. PAULIN
President-CFIF
Furniture Sector
RAMIR V. BONGHANOY
President-Cebu FAME
Gifts, Toys & Housewares Sector
JANET U. CHUA
President- Cebu GTH
Fashion Accessories Sector
NELSON C. BASCONES
President-AFIME
Food Sector
TERESITA D. UYFANG
Rep.-Industrial Goods
Industrial Goods Sector
MAX RICOHERMOSO
Chairman-SIAP
Seaweed Sector
PORFERIO MONTESCLAROS
Secretary-MEPZEM
Ecozone Sector
A POSITION PAPER OF
THE CONFEDERATION OF PHILIPPINE EXPORTERS
(CEBU CHAPTER ALSO KNOWN AS PHILEXPORT CEBU)
ON
A PROPOSED TOTAL BAN ON EXPORT OF SHELLS, CORALS AND SHELL PRODUCTS
INTRODUCTION
The Confederation of Philippine Exporters Foundation (Cebu), Inc., represents nine (9) export sectors in the Central Visayas region, namely: electronics, industrial goods, furniture, seaweed, food, fashion accessories, gifts, toys & housewares, garments and medical tourism. It is the umbrella organization and the voice of the entire export industry in the region. The whole export sector provides employment to hundreds of thousands of workers in the region.
BACKGROUND
The eleventh congress of the Philippines enacted a law entitled "Wildlife Resources Conservation and Protection Act" or otherwise known as R.A. 9147 of July 30, 2001. Section 2 of the Act (Declaration of Policy) provides that "it shall be the policy of the State to conserve the country's wildlife resources and their habitats for sustainability".
In the pursuit of this policy, this Act shall have the following objectives:
(a) to conserve and protect wildlife species and their habitats to promote ecological balance to enhance biological di balance and enhance biological diversity;
(b) to regulate the collection and trade of wildlife;
(c) to pursue, with due regard to the national interest, the Philippine commitment to international conventions, protection of wildlife and their habitats; and
(d) to initiate or support scientific studies on the conservation of biological diversity.
The provisions of this Act shall be enforceable for all wildlife species found in all areas of the country, including protected areas under Republic Act No. 7586, otherwise known as the National Integrated Protected Areas System (NIPAS) Act, and critical habitats. This Act shall also apply to exotic species which are subject to trade, are cultured, maintained and/or bred in captivity or propagated in the country.
Under Sec. 4 of RA 9147, jurisdiction falls on the Department of Environment and Natural Resources (DENR) and the Department of Agriculture (DA). The DENR shall have jurisdiction over all terrestrial plant and animal species, all turtles and tortoises and wetland species, including but not limited to crocodiles, waterbirds and all amphibians and dugong. The DA shall have jurisdiction over all declared aquatic critical habitats, all aquatic resources including but not limited to all fishes, aquatic plants, invertebrates and all marine mammals, except dugong. The secretaries of the DENR and the DA shall review, and by joint administrative order, revise and regularly update the list of species under their respective jurisdiction.
The Philippine Fisheries Act No. 4003, which is an act to amend and compile the laws relating to fish and aquatic resources of the Philippine Islands, and for other purposes, also has a mandate to strictly enforce the protection of our marine resources.
In the international scene an international agreement called CITES or Convention on International Trade in Endangered Species of Wild Fauna and Flora was signed by member governments including the Philippines. CITES aim is to ensure that international trade in specimens of wild animals and plants does not threaten their survival. CITES works by subjecting international trade in specimens of selected species to certain controls. All import, export, re-export and introduction from the sea of species covered by the Convention has to be authorized through a licensing system. Each Party to the Convention must designate one or more Management Authorities in charge of administering that licensing system and one or more Scientific Authorities to advise them on the effects of trade on the status of the species.
HISTORY
In 1981, a foreign NGO reported that the Philippines had an annual export production of around 4,168 tons of unworked shells during the period 1977-1979. The shell industry became a significant dollar earner for the country for several decades during the '70s and '80s. In 1988, export of shells and shellcrafts from the Philippines reached its peak with a total volume of roughly 10,000 tons, making the Philippines as the top supplier of shells and shellcraft worldwide. Since then, exports declined sharply from over 10,000t in 1988 to only 1,600t in 2000. However, export of ornamental shells started to rise during the last 2 years.
It is estimated that Cebu alone exported to at least 38 countries 19,565t of shells and shellcrafts in 1999 worth around US$2.5 million, almost twice the value exported in 1988. In the past 3 to 4 years, Cebu has been exporting an average of about 25 tons of shells and shellcrafts per day. This translates to an annual income of about P37 million which generated livelihood and business opportunities to a number of fishermen, shell dealers and shellcraft manufacturers. Major markets for shells and shellcraft are: USA, Hong Kong, Korea, China, UK, Italy, Poland, the Netherland and Spain.
Many mollusks that used to be so abundant in the Philippine waters became extinct brought about by over-harvesting. Other causes of the decline in the supply of shells are habitat destruction and pollution. The supply of capis or placuna placenta is no longer sufficient to meet the local demand of the capis industry that led shellcraft manufacturers to import capis shells from other countries such as Indonesia and India. Indiscreet harvesting of our marine resources is often blamed as the cause of poverty in the country. The lack of foresight and concern has, in some cases, completely decimated the dwindling wildstock population of fishery products in the country. Had proper management schemes been started, considerable revenues and income could probably have been saved and capis shells, for example, might still be harvested in a sustainable manner.
THE ISSUES
1) Senator Jose Miguel F. Zubiri plans to impose a total ban on the exportation of shells, corals and shell products which could adversely affect the business of legitimate exporters of shellcraft and articles containing shells, and threaten the livelihoods of thousands of workers in their supply and value chains who are dependent on this industry; and
2) Not all shells, corals and other marine life are endangered and prohibited from exploitation including shells that are in the food chain such as clams, mussels, scallops, abalones, whelks, sea slugs, oysters, etc. Some of these are cultured for sustainability.
THE CHALLENGES
The Philippine coastline is 33,900 kilometers long. It has 400,000 to 500,000 hectares of mangrove forests (2008) and 684 square kilometers of wetlands of international importance. It would be totally impossible to police the whole Philippine archipelago.
A 2000 study reveals that the Philippines produces 70,836 metric of mollusks and crustaceans and 627,000 metric tons of aquatic plants. It adds that Filipino's per capita consumption of fish and fishery products is 30 kilos per year. Since 10 kilos of this are different types of shell food, it is estimated that around 40 million empty shells are accumulated. Thus far these empty shells are bought by exporters and shellcraft producers.
Lastly, how do we police our ranks as the umbrella organization of several industries that uses shells and corals as raw materials for export products?
REMEDIAL MEASURES
As umbrella organization of all the exporting sectors of the Central Visayas area, Philexport Cebu, together with its 19 sister chapters in the country are mandated to protect its members via the laws of the land. Philexport imposes very stringent requirements for individual and sectoral membership. It also manages the One Stop Export Documentation Center (OSEDC) wherein affiliated government and private agencies are represented (BOC, BFAR, CPA, DENR and DTI). The BFAR and BOC are both empowered to inspect container vans that contain shell, corals and shell products as per manifest. Additionally, effective June 1, 2011 the BOC implemented the Automated Export Documentation System (AEDS) which requires all exporters to transact business electronically. Only accredited exporters may open an account with BOC via their respective Value Added Service Providers (VASP). The accreditation of exporters via CPRS (Client Profile Registration System) is very extensive and comprehensive. Only legitimate exporters are accredited by BOI, Philexport and other Ecozone agencies, ergo it would be easy to deactivate the accounts of misbehaving exporters.
APPEAL
In view of the circumstances stated above the Confederation of Philippine Exporters in Cebu hereby pray for the following:
a) That the government agencies, LGUs, private sector representatives and the sectoral support organizations, who have jurisdiction, and are empowered to implement our existing laws, be forceful in the execution of their duties and responsibilities to stop the exportation of endangered marine life that threatens our ecosystem as well as our very own survival;
b) That exporters live and operate via a written a code of conduct and place themselves under the oversight scope of their support organizations in order to avoid discrimination and put a stop to the operations of unscrupulous individuals who are in the market just to make a "quick buck" or "killing" for personal gain, and do not "give a heck" about our environment and ecosystem;
c) That authorities, the media, the exporters themselves and other stakeholders for that matter, be educated as to which species or varieties of shells, corals and other marine life are in the endangered or prohibited list;
d) That a database of endangered species and glossary of scientific terms, preferably in the vernacular too, be established as reference point for operatives and stakeholders who share in the joint effort to eliminate the abusive practices of those rotten scoundrels;
e) That stiffer sanctions be imposed on "pouchers" who overharvest or rape the marine ecosystem;
f) That standards for harvesting of sea shells, corals and marine life be set in order for these to reach maturity in size and age before these are harvested; and
g) That shell and shellcraft exporters be involved in replenishment and sustainability programs for varieties that are customarily used for their finished products.
CONCLUSION
We, the representatives of the different export sectors of the Central Visayas, believe that to stop the rape and destruction of our ecosystem, we should put a stop on the demand for these endangered species that play a valuable role in our ecosystem.
We also believe that we can police our ranks or the more than 280 members under the umbrella of our organization.
A total ban on the export of shells, corals and other shell products would simply do more harm than good as a total ban would be too sweeping an option to take as it will result in a major economic loss in the form of export revenues as well as the loss of vital livelihood for the poorer sector of our society.
The export sector is one of the two main drivers of the Philippine economy and generates the biggest employment for the country. Philexport became a reality when the Export Development Act of 1994 (RA 7844) was enacted which provide for the creation of a Export Development Council, a public-private entity empowered to develop the export industry of the Philippines. Please note hereunder the provisions of Section 2 of the Export Development Act of 1994, which states:
"It shall be the policy of the State to evolve export development into a national effort. The government shall champion exports as a focal strategy for a sustainable agri-industrial development to achieve Philippine NIChood towards the year 2000. The private sector shall take the lead in the collective effort to promote exports through discipline and hard work, as it confronts the challenge of winning international markets.
The government and the private sector shall jointly transform the Philippines into an exporting nation. Towards this end, the State shall instill in the Filipino people that exporting is not just a sectoral concern, but the key to national survival and the means through which the economic goals of increased employment and enhanced incomes can most expeditiously be achieved."
In closing, we say that a total ban on the exportation of shells, corals and other shell products is not the remedy to address the rape and destruction of our marine environment. Instead we call for a stricter enforcement of existing laws and a closer and vigilant monitoring of the sector and a very stringent licensing and inspection protocols for trade in shells, corals and shell products.
Signed on 13 June 2011, in Cebu City, Philippines.
VENUS C. GENSON
President- Philexport Cebu
Umbrella Organization
ANGELA F. PAULIN
President-CFIF
Furniture Sector
RAMIR V. BONGHANOY
President-Cebu FAME
Gifts, Toys & Housewares Sector
JANET U. CHUA
President- Cebu GTH
Fashion Accessories Sector
NELSON C. BASCONES
President-AFIME
Food Sector
TERESITA D. UYFANG
Rep.-Industrial Goods
Industrial Goods Sector
MAX RICOHERMOSO
Chairman-SIAP
Seaweed Sector
PORFERIO MONTESCLAROS
Secretary-MEPZEM
Ecozone Sector
A POSITION PAPER OF
THE CONFEDERATION OF PHILIPPINE EXPORTERS
(CEBU CHAPTER ALSO KNOWN AS PHILEXPORT CEBU)
ON THE
PETITION OF SEVERAL LABOR GROUPS
FOR A MANDATED INCREASE IN THE MINIMUM WAGE
INTRODUCTION
The Confederation of Philippine Exporters Foundation (Cebu), Inc., represents nine (9) export sectors in the Central Visayas region, namely: electronics, industrial goods, furniture, seaweed, food, fashion accessories, gifts, toys & housewares, garments and medical tourism. It is the umbrella organization and the voice of the entire export industry in the region. The whole export sector provides employment to hundreds of thousands of workers in the region.
BACKGROUND
In 2007, prior to the collapse of the subprime market in the U.S., which ushered into a global financial crisis that lasted more than 2 years, the Central Visayas region boasted of more than 700 exporters, contributing around 10% or approximately $4 billion to the country's total export performance of $40 billion. Industry estimates that the region's number of exporters has plunged to around 400 in 2010 and has continued to slide further in the first quarter of 2011 by 18%. The collateral damage to the region's employment position, regular and contract workers, due to company closures and retrenchment, is estimated at 150,000. This contraction in the region's employment situation was somehow offset by the expansion in the "sunshine" services sectors such as the contact centers and business process outsourcing sectors.
On May 5, 2011, President Benigno S. Aquino, speaking before employers during the 32nd National Conference of Employers, suggested to the top employers to grant some kind of productivity incentive or profit-sharing schemes to workers as a relief from soaring fuel and food prices.
The labor groups have been petitioning for across-the-board wage hikes from P75 to P125 per day. President Aquino further added that he has no intention of asking Congress for a legislated wage hike but added that the Bangko Sentral ng Pilipinas (BSP) believes that a "certain kind of wage adjustment" can be absorbed by the economy. The adjustment, the BSP suggests, may be determined by the respective Regional Tripartite Wage and Productivity Boards (RTWPBs).
The RTWPB covering the National Capital Region (NCR) immediately acted and granted workers in the NCR a cost of living wage adjustment (COLA) of P22 per day. This was immediately assailed by the unions and the Partido ng Manggagawa as too little while claiming that a P50 per day increase was what employers owe its workers in terms of loss in purchasing power and the unpaid share in increase in productivity.
THE ISSUES
1) Which is the more pressing issue, jobs generation or wage hikes?
2) What can business afford?
3) In what form should an adjustment be:
Cost of Living Adjustment or Special Amelioration Allowance?
Profit sharing?
Other productivity incentives?
4) Is it possible for "sunshine industries" to pay a higher rate than the "challenged" industries?
In our opinion the RTWPB in Region VII, based on its performance in the past 5 years under the stewardship of DOLE Regional Director Elias Cayanong and DTI Regional Director Aster Caberte, has acted fairly towards business and labor. During the times of crisis the RTWPB-VII, cognizant of the plight of exporters and workers, has granted minimum wage adjustments that we in the export sector deemed as fair and reasonable. The exporters in the past wage hikes have accepted all the decisions of the RTWPB-VII without complaint as the impact of these increases were then mitigated by the financial support given by government in the form of export support funds. The grant of these funds has so far been suspended since the start of the 2011.
THE CHALLENGES
1) The strength of the PESO, which has been range-bound between P42.50 and P43.50 vis-à-vis the US Dollar, has continued to put pressure on the competitiveness and bottom lines of exporters;
2) Absence of government support for export development and marketing;
3) The continued "softness" of demand in the Philippines' main markets; and
4) The inflation in cost of raw materials and logistics brought about by high fuel prices.
5) The headline inflation rate (which includes food and energy prices) has significantly risen to 4.6% in April compared to the annualized 3.7% rise in 2010 and 3.9% in 2009.
APPEAL
In view of the circumstances stated above the Confederation of Philippine Exporters in Cebu hereby pray for the following:
a) That government, private enterprise and labor instead focus on job generation rather than on mandated across-the-board wage adjustments;
b) That the RTWPB-VII will act prudently and reasonably on any wage increases or cost of living adjustments, taking in consideration the mutually assured survival of both employers and workers;
c) That government resumes its support for the SME members of the industry, who are still languishing in the doldrums due to the global economic crisis, by reinstating the Export Support Fund; and
d) That a two (2) tier rate adjustment be granted, one for the sunshine industries (higher) and one for the "challenged" industries (lower).
CONCLUSION
Though we are fully sympathetic to the plight of workers, and the continuous rise in the cost of basic commodities, it is also to the interest and survival of these workers that we ensure as well our own survival as employers. As stated earlier our real concern is really job generation or retention rather than wage adjustments that could cause a further deterioration of the jobs situation. We strongly urge all parties concerned to lean favorably in considering our prayers and position.
Signed on 23 May 2011, in Cebu City, Philippines.
VENUS C. GENSON
President- Philexport Cebu
Umbrella Organization
ANGELA F. PAULIN
President-CFIF
Furniture Sector
RAMIR V. BONGHANOY
President-Cebu FAME
Gifts, Toys & Housewares Sector
JANET U. CHUA
President- Cebu GTH
Fashion Accessories Sector
NELSON C. BASCONES
President-AFIME
Food Sector
TERESITA D. UYFANG
Rep.-Industrial Goods
Industrial Goods Sector
MAX RICOHERMOSO
Chairman-SIAP
Seaweed Sector
PORFERIO MONTESCLAROS
Secretary-MEPZEM
Electronics Sector
SAMSON O. CHIU
Representative- CGIA
Garments Sector
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