The food exports of the Philippines to the United States face potential losses of about $200 million annually with the passing of the US Food Safety Modernization Act (FSMA). This law – signed by President Barack Obama back in 2011 – aims to impose “stricter standards over local and imported food products.” Food Entrepreneurs and Exporters Organization of the Philippines (FEOP) president Jesus M. Tanchanco asserts that most of the Philippine exporters “will not be able to comply with the [act].” The passing of the law brings about complications and heavy implications to the exports of the country. Looking at the numbers helps create a better picture of the situation:
  • 90% of food exporters are SMEs (small-medium enterprises).
  • Almost 50% of locally processed food is exported to the United States.
  • The Philippines exported around $500,000 to the US ($250,000 in North America) back in 2011, lagging behind other Asian competitors namely Thailand.
  • 2012 exports show that although food exports grew by 11.56%, it only comprised 6.8% of the country’s total exports.

         There is a glaring weakness in our country’s processed food industry. The US Food Safety Modernization Act further highlights this defect in this part of the market. Inability to cope up with increasing demands for modernization of food processing, as well a meager share in the country’s total exports show how this industry lags in providing a boost for our economy. In effect, the US FSMA is just like throwing salt in the wound, incapacitating the Philippines at an aspect that hardly posts exceptional performance.

          The effects of this law reveal more than what we see as hindrances to growth and development. Aside from economic implications, one can draw out social inferences as well. The lag of SMEs in modernizing business processes draws either one of two things: lack of money to cope, or a conservatism favoring traditional practices, thus the resistance to evolve. The reasons may vary, but the effect to the economy remains the same: irrelevance of the processed food exports. The impending implementation of the US Food Safety Modernization Act should create a sense of urgency among the SMEs under the processed food industry. It is already bad for exporters that the Philippine peso is appreciating (because their earnings in dollars have lower peso value), and then the shrinking of opportunity posed by the US FSMA makes matters worse.

           There is a need to modernize the approach in food processing should Philippine exporters continue to engage in the global market. The pressing call for higher standards in the processed food industry may either lift Philippine SMEs to new heights, or may ultimately be the cause for its demise. Hopefully, Filipinos opt for the former than the latter. 

(Taken from Malaya Business Insight, Issue: July 10, 2013)

by: Emilio Antonio | Marcella Karaan | Julian Martinez | Ivy Zuniga

Leave a Reply.