The California Asian Paciﬁc Chamber of Commerce presents the 2019 Grow Your Export Forum Series. This series aims to educate small and medium-sized enterprises (SMEs) on export opportunities and resources. We bring together export specialists and international trade experts to discuss current trends in global trade, highlight emerging markets, and share insight on the tools and resources available to U.S. SMEs.
Grow Your Export Forum San Jose was held on March 21, 2019. This forum covered export topics around the Philippine business market, the South Korea business market, and the federal and private-sector resources available to help SMEs begin the export process. This report highlights the key points to help a business decide on a market and navigate through export procedures. We’re bringing this event to Irvine in July – you can register here.
PHILIPPINE BUSINESS OUTLOOK
Philippines is the gateway to the Association of South-east Asian Nations (ASEAN). As it only takes about three to ﬁve hours to travel to Japan, South Korea, Hong Kong, Thailand, Malaysia, Singapore, and Indonesia, the Philip-pines can be a prime trading point to export your product across Asia. In addition to its central location, the Philippines annual GDP continues to grow 6.5 percent, driven by the industrial, service and agricultural sectors.
The Philippines has 12 top priority categories for domestic and export markets. The diversified set of industries where the Philippines has a comparative advantage are electrical and electronics, IT BPM, Creative, e-Commerce, Agri-business, Transport, Logistics, Construction, Tourism, Auto and Auto Parts, Tool and Die, Iron and Steel, Shipbuilding, RORO (Roll on/Roll off); Innovation, R&D, Aerospace Parts, Chemicals, Furniture, Garnets, Parts and Components, and Climate Change.
Foreign direct investment (FDI) into the Philippines reached $9.8 Billion USD in 2018. The inflow of FDI is expected to top $10 billion USD anew in 2018 and 2019 as investors continue to view the Philippines as a favorable investment destination, according to the Bangko Sentral ng Pilipinas (BSP).
Infrastructure remains a priority sector as government spending is targeted to reach from 5.3 percent of GDP in 2017 to around 7.4 percent of GDP by 2022. The total of 75 infrastructure projects in the pipeline under the Build, Build, Build government program are expected to cost over $160 Billion USD between 2017 and 2022. Of the 75 projects, 18 percent will be carried out through Public-Private Partnership. Opportunity industries include Airports/Seaports, Transportation (air, land, and water), roads bridges, flood control, railways, and communications, and new cities.
The Philippines is currently facing a “demographic sweet spot” where a large number of their population is of working age. 62.4 percent of the population is of working age from 15 to 64 and the median population age is 24.1. The country has a population of about 106.51 million with a growth rate of 1.72 percent from 2010 to 2015. These metrics illustrate that the Philippines has young competent and reliable human resources, who are creative innovative, hardworking people with a 97.5 percent literacy rate. 73 percent of the 2017 GDP went to private consumption and within this category, 42.3 percent went to Food and Non-alcoholic beverages. The working age group are heavy consumers, seeking a westernized lifestyle and spend much of their time and money in shopping malls.
In 2018, the U.S. was the Philippines third trading partner, first export market, and fourth import supplier. The U.S. exported $7.8 billion USD to the Philippines in 2017 with the largest categories being electronics, fresh food, and transport.
SOUTH KOREA BUSINESS OUTLOOK
As of 2017, South Korea is the world’s sixth largest exporter and has increased 54.5 percent in exports over the last ten years. South Korea exported $144.1 billion USD in 1997 to $371.5 billion USD in 2007, then jumped to $573.9 billion USD in 2017.
South Korea’s top industries stem from the technology and automotive space. Leading industries with the larg-est market share are Dynamic Random-Access Memory (DRAM) with 73.1 percent market share, then chemicals, steel, display, lithium battery, transportation machinery, and smartphones.
According to the World Bank’s Annual Doing Business report for 2017, South Korea is the world’s fourth easi-est place for business. South Korea’s rank continuously rose from 2007 to 2018. Among the invested-enterprises in Korea, many of them are globally well-known brands that have launched operations in Korea much earlier than many had expected. Currently 223 enterprises of the For-tune Global 500 have entered into Korea’s financial, technology, motor vehicles & parts, and health care markets.
Bloomberg Business Week named South Korea the 2018 Most Innovative Country in the World with first in Patent Activity, second in Value-added Manufacturing, second in R&D Intensity and third in Tertiary efficiency. The Korean geographical environment and sophisticated consumer power have made the Korean market a strategically valuable test bed. Global companies from various fields, including those in the fields of entertainment, fashion and beauty are recognizing the Korean market as a test bed for new products and new markets.
PANEL: RESOURCES AND TOOLS
Panel Moderator, Joanne Vliet, introducing panelists, Jeff Deiss, Sergei Mytko, and Gregory Moore.
“Survey states 50 percent of small businesses say 10 per-cent of their sales come from export,” says Jeff Deiss, Regional Finance Manager – Northern California, SBA. Begin conversations about international expansion while business is growing domestically, so you can be ready for foreign buyers. Consider diversifying your portfolio by expanding to new markets overseas. Exporting helps ex-pand and grow your business when domestic markets are slow. Sergei Mytko, Managing Director, International Tax, Crowe LLP says, “Having greater portion of your sales from exports, reduces your tax rate in the U.S.”
The U.S. dollar is strong abroad, but that also means that your product is more expensive in comparison to your potential competitors overseas. Be mindful of your competitors overseas and consider how foreign consum-ers may view your product and its price. Performing prop-er due diligence is key to entering a new market.
“The Department of Commerce offers an international company profile, informally known as a background check service,” says Joanne Vliet, Director of U.S. Com-mercial Service Silicon Valley. This service is offered in all domestic and international locations through com-mercial offices in U.S. embassies and consulates.
Protect your intellectual property before exporting. It is important to ensure your brand, trademark, and any technical intellectual property is protected.
Stopfakes.gov Roadshow is a key program to under-standing your intellectual property risks and how to reg-ister to protect your intellectual property overseas. “Do it right and do it now, before you go international,” says Jeff Deiss, SBA. The legal, registration, translation costs can add up, but is an essential investment to make. Once you lose your intellectual property, then you can never get it back.
“Look at your buyers as the primary source of payment, not EXIM Bank,” says Gregory Moore, Regional Director of EXIM Bank. EXIM Bank is the middle man between export/import transactions. When the buyer defaults on payment, businesses can file a claim to EXIM Bank and can typically receive 95 percent of that transaction back. There is no limit that EXIM Bank will insure. It is im-portant to utilize this resource to mitigate risk when working with a new buyer and protect your business from potential financial loss.