APPENDIX B BEST PROSPECTS FOR U.S. EXPORTS (U.S.$ millions) INDUSTRIAL PRODUCTS A. Rank: 1 B. Name of Sector: TELECOMMUNICATIONS EQUIPMENT C. ITA Code: TEL EST. EST. 1993 1994 1995 D. Total Market Size 823.43 1,278.00 1,771.00 E. Total Local Production 100.00 120.00 150.00 F. Total Exports negl. negl. negl. G. Total Imports 723.43 1,158.00 1,621.00 H. Total Imports from U.S. 209.85 350.00 550.00 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: The Philippine government undertook major strides to liberalize the telecommunications sector in 1993, allowing competition in the provision of a variety of telecommunications services. The Ramos administration issued policies mandating the interconnection of competing phone systems with the dominant telephone operator, Philippine Long Distance Telephone Company (PLDT) and opening the country to other franchise holders. These policies resulted in the entry of powerful Filipino families partnering with foreign investors to offer telecommunications services such as international gateways, cellular and paging. The new companies competing with PLDT are required by the Government to install 300-400,000 new telephone lines in their respective service areas within the next three to five years. PLDT itself plans to install one million new telephone lines from 1993-96, half of which will be installed on a "build-manage-transfer" basis. Every aspect of the industry needs support, including basic services and equipment, value- added services, software, and consulting, creating tremendous commercial opportunities for U.S. firms. More than two billion dollars in government and private sector investment is anticipated within the next three years. Most promising subsectors with estimated 1995 market size are Telephone and Telex, US$ 395 million; Cellular, US$ 300 million; Satellite equipment and technology, including Very Small Aperture Terminals (VSATs), US$ 200 million and Radio Paging, US$ 150 million. A. Rank: 2 B. Name of Sector: ELECTRICAL POWER SYSTEMS C. ITA Code: ELP EST. EST. 1993 1994 1995 D. Total Market Size 960.83 1,336.32 1,870.09 E. Total Local Production 241.66 290.00 348.00 F. Total Exports 70.38 98.53 137.94 G. Total Imports 789.55 1,144.85 1,660.03 H. Total Imports from U.S. 163.30 228.62 320.06 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: Both the Philippine Government and the private sector are undertaking projects to meet current power demand and expected demand growth. Imports account for over 80 percent of total consumption, with U.S. suppliers' share about 21 percent. This share will further expand through 1995, considering that U.S. suppliers have a good reputation in this market and are aggressively pursuing opportunities in private power development either through build-operate-transfer (BOT), build-own- operate (BOO), or rehabilitate-own-lease (ROL) arrangements. Quality and volume of locally produced/fabricated equipment is not projected to increase, so imports will continue to fulfill most demand. Several electrification projects will be implemented in the next three years as part of the 1993-2000 Philippine Energy Plan, which envisions increasing the country's electrification level from 60 percent in 1992 to 96 percent by the year 2000. To achieve these targets, the National Power Corporation will undertake fast-track and baseload projects, and the National Electrification Administration and Manila Electric & Light Co. (Meralco) will construct new substations, rehabilitate old ones, and upgrade distribution systems for electric cooperatives throughout the country. Financing support for some of these projects is being provided by the World Bank (WB), the Overseas Economic Cooperation Fund (OECF), and the Asian Development Bank. Most promising subsectors with estimated 1995 market size are Power Generating Machinery & Equipment, $1,024.29 million and Electric Distribution Equipment, $846 million. A. Rank: 3 B. Name of Sector: BUILDING PRODUCTS C. ITA Code: BLD EST. EST. 1993 1994 1995 D. Total Market Size 873.88 1,210.00 1,544.00 E. Total Local Production 750.00 1,050.00 1,365.00 F. Total Exports 100.82 110.00 121.00 G. Total Imports 224.70 270.00 300.00 H. Total Imports from U.S. 24.58 40.50 45.00 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: Major construction projects foreseen under the 1993-98 Medium Term Development Plan offer considerable opportunities for U.S. firms. Construction investment is project to increase by 11 percent over the 1995-98 period, and will be distributed among such infrastructure projects as: construction of an arterial and secondary national road network in Metro Manila and in other key urban centers; installation of flood control structures for principal rivers; rural water supply improvement; upgrading of National Power Corporation transmission lines and power generation facilities; irrigation systems supporting the Comprehensive Agrarian Reform Program and the Grains Production Enhancement Program of the Department of Agriculture; nationwide rural electrification, requiring new construction of, and rehabilitation of existing, power transmission lines and distribution facilities; expansion of Ninoy Aquino International Airport and of provincial airports; and light rail transit expansion projects in Metro Manila. Demand for building products also will increase for residential and non- residential construction activities. In 1994 alone, 200,000 low cost housing units are targeted to be completed. The Philippine National Shelter Program is extending housing loans to 1.1 million households by 1998. Non-residential construction, particularly commercial building construction, is expected to increase as foreign equity investments rise. Major construction projects in the pipeline include Filinvest Development Corporation's high-density business and commercial center, a $120 million Taiwanese industrial park at Subic Bay Free Port, and Ayala Land Inc.'s upscale residential condominiums in Makati. Most promising subsectors with estimated 1995 market size are Iron and Steel Products, $552 million; Portland Cement and Clinker, $460 million; and Low-cost Housing Materials, $200 million. A. Rank: 4 B. Name of Sector: Aircraft and Parts C. ITA Code: AIR EST. EST. 1993 1994 1995 D. Total Market Size 592.68 684.38 790.11 E. Total Local Production n.a.* n.a. n.a. F. Total Exports 55.94 61.53 67.69 G. Total Imports 648.62 745.91 857.80 H. Total Imports from U.S. 480.99 553.13 636.10 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.90 Comments: The Philippines has over 200 non-military airports operated by the Government and private sector that are serviced by Philippine Airlines and other Filipino domestic carriers. Three new domestic airlines were given approval to begin operations in 1994 and will need to acquire short-haul aircraft in the 30-50 passenger range, creating demand for such U.S. components as aircraft engines and avionics. The Philippine Government also has specific needs. The modernization program of the Philippine National Police calls for acquisition of 40 fixed wing aircraft and 15 helicopters. The Armed Forces of the Philippines also is embarking on a modernization program. Anticipated acquisitions by the Philippine Air Force include multi-role fighter aircraft, fixed-wing airlift aircraft, rotary wing airlift aircraft, reconaissance photograph aircraft, and training simulators. The Philippine Navy will require multi-mission aircraft, maritime patrol helicopters, and training equipment. Philippine Airlines operates a maintenance facility to service its own fleet and has a USFAA foreign repair station certificate. Government- owned Philippine Aerospace Development Corporation is also engaged in the maintenance, overhaul and assembly of aircraft, and is heavily involved in the procurement process for the Philippine Armed Forces. Three foreign companies reportedly are due to establish aircraft maintenance and repair facilities in the Philippines in 1994 or 1995. The U.S. traditionally has been the largest supplier to the Philippines of aircraft and aircraft parts, with Germany, Japan and Singapore as secondary suppliers. Most promising subsectors with estimated 1995 market size are Airplanes and Other Aircraft, Mechanically Propelled, $500 million and Parts of Airplanes/Helicopters, $150 million. * n.a. - Not Available A. Rank: 5 B. Name of Sector: INDUSTRIAL CHEMICALS C. ITA Code: ICH EST. EST. 1993 1994 1995 D. Total Market Size 846.64 960.14 1,089.28 E. Total Local Production 316.66 348.35 383.18 F. Total Exports 46.27 50.90 55.99 G. Total Imports 576.25 662.69 762.09 H. Total Imports from U.S. 97.26 105.04 113.44 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: There are over 300 Filipino manufacturers of industrial chemicals and chemical products, a third of which are among the top 1,000 corporations in the country. The plastics industry is growing in importance, and depends largely upon imported plastic resins, such as polyethelene and polypropylene. While the Philippines is the world's largest producer of coconut oil, the principal feedstock for oleochemical production, it imports secondary raw materials used to make oleochemicals, which are in turn used in a variety of industries, such as soaps and detergents, cosmetics and pharmaceuticals, lubricants, food and beverages, and textiles. Imported substances also support indigenous production of sucro-chemicals, including ethanol and other fermentation products, and of flavors, fragrances and oils for the food and beverage industry. Major suppliers of imported raw materials are the U.S., Germany, the Netherlands, Korea and Brazil. Organic chemicals, resins and plastics materials comprise almost half of all imports. Organic chemicals have an estimated market size of $488 million in 1995. A. Rank: 6 B. Name of Sector: COMPUTERS AND PERIPHERALS C. ITA Code: CPT EST. EST. 1993 1994 1995 D. Total Market Size 105.46 136.00 177.00 E. Total Local Production negl. negl. negl. F. Total Exports negl. negl. negl. G. Total Imports 105.46 136.00 177.00 H. Total Imports from U.S. 29.85 38.85 50.00 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: Government and private sector organizations are making a puch to upgrade current levels of automation. The Bureau of Internal Revenue (BIR), the Land Transportation Office (LTO), the Professional Regulation Commission (PRC) and the Philippine Postal Savings Bank (PPSB) are among the Philippine Government agencies planning to implement comprehensive computerization projects. The BIR is negotiating with suppliers on a $61 million Philippine Tax Computerization Project. LTO is implementing a program to computerize its current system, which will call for setting up wide area networks connecting its regional, district and central offices. The PPSB, which will be re-opened in July 1994, will require computer hardware and software for an electronic bank network project among its 2,187 post offices. In the private sector, manufacturing companies are gradually shifting to computerized operations, while businesses--particularly those in insurance and accounting--are upgrading to LAN or WAN systems. The next three years will see continued growth in demand for networking technology and hardware, and computer peripherals such as laser printers. The most promising subsectors with estimated 1995 market size are Peripherals, $68 million; and Networking Hardware/Software, including PCs, $45 million. A. Rank: 7 B. Name of Sector: ARCHITECTURAL, CONSTRUCTION, AND ENGINEERING SERVICES C. ITA Code: ACE EST. EST. 1993 1994 1995 D. Total Sales 35.0 45.0 55.0 E. Sales by Local Firms 5.0 5.0 7.0 F. Sales Overseas by Local Firms N/A N/A N/A G. Sales by Foreign-Owned Firms 30.0 40.0 48.0 H. Sales by U.S.-Owned Firms 8.0 15.0 18.0 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: While the Philippines has a substantial pool of skilled professionals, it relies to a large extent on foreign expertise in engineering, construction, and architecture. Foreign consulting and management services will be needed for the range of projects the Philippines will undertake in 1995-98 as part of the Infrastructure Development Plan, including telecommunications development, upgrading of power generation and distribution facilities, transportation (including road and light rail transit contruction), port development, and development of irrigation systems. Many of these projects are to receive funding assistance for the Asian Development Bank, the World Bank, the U.S. Agency for International Development, and Japan's Overseas Economic Cooperation Fund. Major private, industrial and government projects require either engineering or technical services from both local and foreign consulting firms. U.S. consulting firms have established a strong presence in the sector through local affiliates and agents. Aside from various construction projects, best prospects for U.S. firms exist in telecommunications, energy and power, transportation, and water resources. A. Rank: 8 B. Name of Sector: MEDICAL EQUIPMENT C. ITA Code: MED EST. EST. 1993 1994 1995 D. Total Market Size 38.46 46.01 55.03 E. Total Local Production negl. negl. negl. F. Total Exports 1.39 1.81 2.35 G. Total Imports 39.85 47.82 57.38 H. Total Imports from U.S. 10.02 13.03 16.94 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: The Philippine medical equipment market will show steady growth as end- users, both government and private, continue to upgrade existing equipment and purchase new, technologically advanced clinical and diagnostic equipment. Tertiary hospitals in Metro Manila, such a the Makati Medical Center, Medical Center of Manila, St. Luke's Hospital, Capitol Medical Center, and others offering diagnostic and therapeutic services, require state-of-the-art equipment. These medical centers have begun to advertise widely in order to attract new clients. Since domestic production is negligible, demand for modern equipment is met almost entirely through imports. There are approximately 1,748 hospitals in the Philippines with a total bed capacity of 85,634. Of this total, 574 are government hospitals and approximately 1,170 are private sector. Tertiary hospitals in both categories that have the financial capability to procure bigger-ticket capital equipment number about 262. Generally speaking, Filipino doctors and consultants are familiar with U.S.-made equipment, especially since many practicioners have been trained in the U.S. An increasing number of health maintenance organizations (HMOs) has enhanced the entire medical industry. HMOs extend medical financing assistance to qualified members and their dependents. In addition, the Senate is considering a bill creating the National Health Insurance Program that would extend health-care benefits to a wider proportion of the Philippine population. Most promising subsectors with their estimated 1995 market size are Medical Supplies/Disposables, $24 million; Other Medical, Surgical, and Veterinary Instruments and Appliances, $20.64 million; and Radiological Equipment, $7 million. A. Rank: 9 B. Name of Sector: PUMPS, VALVES AND COMPRESSORS C. ITA Code: PVC EST. EST. 1993 1994 1995 D. Total Market Size 86.74 95.41 104.95 E. Total Local Production n.a. n.a. n.a. F. Total Exports 8.90 9.61 10.38 G. Total Imports 95.64 105.20 115.72 H. Total Imports from U.S. 21.17 25.40 30.48 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: The Philippine Government accounts for approximately 40 percent of the total market demand for PVC. Major buyers are the Metropolitan Waterworks and Sewerage System (MWSS), National Irrigation Administration (NIA), Department of Public Works & Highways (DPWH), and local Water Utilities Administration (LWUA). In the private sector, the major end-using industries are oil & gas, petroleum refining, construction, mining, pulp & paper, textile finishing and dyeing, sugar, plastics, and chemicals. The latter industries account for about 60 percent of total demand. The market is expected to experience steady growth owing to a number of developments in the end-user sectors. Ten major projects being undertaken by MWSS will require approximately $58 million worth of pumps over the next nine years. LWUA's 71 water districts will need pumps valued at about $8.8 million. The three petroleum refineries (Shell, Caltex, and Petron) are expanding their capacities either through establishment of new facilities or debottling of existing refineries, and are major end-users of PVC. Demand will likewise come from private developers for power projects, whether the projects are fossil-fueled, geothermal, coal-fired, single or combined cycle, or power barges. Expansion of the facilities of Bacnotan Cement and the Phinma Group, the two major producers of cement, as well as expansion programs of pulp and paper producers, are other sources of increased demand. In 1995, total market size for the most promising subsectors of Pumps and Compressors will be $47 million and $66 million, respectively. A. Rank: 10 B. Name of Sector: FOOD PROCESSING AND PACKAGING EQUIPMENT C. ITA Code: FPP EST. EST. 1993 1994 1995 D. Total Market Size 55.76 63.81 72.91 E. Total Local Production negl. negl. negl. F. Total Exports 0.90 1.35 2.02 G. Total Imports 56.66 65.16 74.93 H. Total Imports from U.S. 11.09 13.86 17.32 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: The Philippine food processing sector is fast-growing and widely diverse in terms of business size and activity mix. Altogether there are over 29,000 food processing establishments in the country. The U.S. Embassy's Foreign Agricultural Service estimates that 55 percent of total consumption spending goes to food products, with Filipino tastes and product preferences growing more sophisticated as disposable income increases and the population becomes more urbanized. The food processing sector is dominated by large-scale agro-industrial corporations dedicated primarily to supplying the expanding domestic market, with a few firms also involved in exporting processed foods (particularly large multinationals such as Dole and DelMonte). Some U.S. food corporations operate locally via licensing arrangements with local companies, including Kraft/General Foods, CPC International, Coca- Cola, and Pepsico. Myriad small and medium-scale companies produce processed foods requiring relatively low technology and simple equipment. U.S. equipment has an established reputation for high quality and advanced technology, although European suppliers are very aggressive in market promotion by conducting sales and technical visits to current and potential end-user firms. Most promising subsectors and their corresponding estimated 1995 market size are Machinery for Filling, Closing, Sealing & Capsuling/Labelling Bottles, $24 million; and Other Packing & Wrapping Machines, $19 million. A. Rank: 11 B. Name of Sector: HOTEL AND RESTAURANT EQUIPMENT C. ITA Code: HTL EST. EST. 1993 1994 1995 D. Total Market Size 30.69 37.86 46.78 E. Total Local Production 4.01 4.41 4.85 F. Total Exports 0.68 0.75 0.82 G. Total Imports 27.36 34.20 42.75 H. Total Imports from U.S. 9.20 11.96 15.55 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 J. Comments: Purchases of hotel and restaurant equipment will be made by existing hotels undergoing renovation and upgrading equipment, as well as by new hotels currently under construction and scheduled to open over the next two years. The 1993 Investment Priorities Plan provides incentives such as tax and duty-free importation of capital equipment to new projects, and expansion of existing hotels and resorts outside the National Capital Region. A recent entry is the Days Inn licensee, which is reportedly investing $36.5 million to establish almost 100 three-and four-star hotels throughout the Philippines. Other tourism-related projects that have been approved by the Board of Investments include those undertaken by Ten Knots Development Corporation ($8 million); Montemar Resort & Development Corp. ($3.3 million); Dynasty, Inc. ($2.2 million); and Grand City Hotel ($1.6 million). Supporting tourism development is an increase in visitor arrivals in 1993 to over 130,000, according to the Philippine Department of Tourism. In addition, rapid development of new restaurants, shopping malls, fast food centers, franchised food establishments, and entertainment centers has taken place in the Metro Manila area. U.S.-made equipment is favored by developers because of its quality, durability, and efficiency. Local manufacture is currently confined to custom- fabrication of stainless steel work for hotels and restaurants, as well as less-sophisticated cooking equipment. Most promising subsectors with estimated 1995 market size are Refrigerating/Freezing Equipment; $16 million; and Washing Machines for Washing, Other Than Clothes Washing Machines, $9 million. A. Rank: 12 B. Name of Sector: LABORATORY & SCIENTIFIC INSTRUMENTS C. ITA Code: LAB EST. EST. 1993 1994 1995 D. Total Market Size 68.24 88.87 115.72 E. Total Local Production n.a. n.a. n.a. F. Total Exports 1.06 1.22 1.40 G. Total Imports 69.30 90.09 117.12 H. Total Imports from U.S. 15.09 18.86 23.56 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: The Philippine market for laboratory and scientific instruments is largely supplied by imports, 21 percent of which were sourced from the United States. Domestic production is negligible, and is limited to less-sophisticated laboratory furnaces and ovens, thermometers, and some electrical regulating/controlling instruments. Demand for laboratory instruments will come from the chemical, oil exploration, food processing, and petroleum refining industries, which together account for about 70 percent of the total market. Improvement in the Philippine economy is expected to result in increased activity in these industries, necessitating laboratory operations with ever more sophistication. Other end-users are institutional, educational and scientific research laboratories, which will contribute to demand for equipment outlined below. Most promising subsectors with the estimated 1995 market size are Electrical Regulating/Controlling Instruments, NES, $14 million; Surveying, Hydrographic, Oceanographic, Hydrological, Meteorological, Geophyscial Instruments & Appliances, NES, $13 million; Centrifuges, $9 million; and Instruments & Apparatus for Physical and Chemical Analysis, NES, $5 million. A. Rank: 13 B. Name of Sector: POLLUTION CONTROL EQUIPMENT (FILTERING & PURIFYING EQUIPMENT) C. ITA Code: POL EST. EST. 1993 1994 1995 D. Total Market Size 50.40 63.00 78.75 E. Total Local Production n.a. n.a. n.a. F. Total Exports 2.64 2.71 2.85 G. Total Imports 14.32 20.05 30.10 H. Total Imports from U.S. 4.66 8.39 15.94 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: The Department of Environment and Natural Resources (DENR) and the Environmental Management Bureau (EMB) spearhead the Philippine Government's efforts to implement and enforce the country's environmental protection policies. They are supported by other Government agencies such as the Manila Metropolitan Authority, the Task Force on Pasig River Rehabilitation, and the Laguna Lake Development Authority. Despite the long list of agencies assigned to protect the environment, conditions continue to deteriorate, particularly in the Metro Manila area and in other urban centers. Under pressure from non-governmental organizations, citizens' groups, and other environmental activists, the Philippine Government has begun to enforce existing regulations more strictly. In addition, policies such as ISO 13000 will require Philippine exporters to meet rigorous environmental compliance standards by the year 2000. Large multinationals and Filipino corporations are setting examples for other companies to follow. A number of projects are also being financed by multilateral lending institutions such as the Asian Development Bank and the World Bank. According to a recent World Bank study, the most pressing problem for the Metro Manila area is wastewater discharge into Manila Bay and the surrounding rivers that feed into it. Over 350 sites have been identified as needing new or upgraded wastewater treatment facilities, at a total estimated investment of $143 million over the next five years. Due to the lack of indigenous technical capabilities, the Philippines is largely dependent on foreign sources of equipment and expertise. The United States' estimated share of the import market for wastewater equipment and instrumentation was 21 percent in 1990, compared with 23 percent for Japan and 19 percent for Germany. Demand is greatest in the following sectors: Food & Beverage Production, Electronics & Metal Finishing, Pulp and Paper, Chemical and Petrochemical, Cement Manufacturing, and Sugar Milling and Refining. A. Rank: 14 B. Name of Sector: AUTOMOTIVE PARTS AND SERVICE EQUIPMENT C. ITA Code: APS EST. EST. 1993 1994 1995 D. Total Market Size 120.00 143.58 165.12 E. Total Local Production 57.11 67.23 76.83 F. Total Exports 8.88 9.80 10.78 G. Total Imports 71.77 86.15 99.07 H. Total Imports from U.S. 2.13 2.60 3.10 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: Sales of automotive parts and related service equipment have grown apace with increased sales of used cars and other motor vehicles. Total market demand is estimated to grow by 18 percent per year from 1995-98. U.S. auto parts makers can capitalize on this growth through technology transfer or joint venture arrangements with local manufacturers, particularly under the Philippine Government's Car Development Program. This program requires local assemblers to put in 40-50 percent local content to assembled units. Areas with good opportunities for U.S. participation include production of engines and transmissions, wire harnesses, engine blocks, pressed metal parts, radiators, and oil and fuel filters. Most promising subsectors with estimated 1995 market size are Tire and Accessories, $75 million; Engines and Parts, $75 million; Transmissions including Belts; $50 million; and Other Automotive Accessories, $30 million. A. Rank: 15 B. Name of Sector: SPORTING GOODS AND RECREATIONAL EQUIPMENT C. ITA Code : SPT EST. EST. 1993 1994 1995 D. Total Market Size 41.43 53.18 65.12 E. Total Local Production 32.27 45.95 51.22 F. Total Exports 22.59 32.46 35.71 G. Total Imports 31.75 39.69 49.61 H. Total Imports from U.S. 3.44 4.30 5.38 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: The Philippine market for sporting goods and recreational equipment is rapidly increasing. This can be attributed to the promotion of sports and the populace's relatively young age and to its growing health consciousness. Basketball and golf are very popular in the Philippines. The local market is dependent on imports since local production is limited and locally-made products are not price-competitive. Likewise, Filipinos perceive that the quality and durability of imported products are better than that of local products. Taiwan, Japan and U.S. are the major sources of imported sporting goods and recreational equipment. The U.S., which holds an 11 percent share of total imports, is a major source of bowling equipment, pool tables and other game tables; parts and accessories of bicycles and cycles; and sporting shotguns. Imported sporting goods and recreational equipment presently has significantly lower tariff rates than the raw materials and machinery that would be imported to fabricate this equipment locally. Most promising subsectors with estimated 1995 market size are Golf Equipment, $3 million and Balls for Basketball, $1.5 million; Gymnasium/Athletic Articles and Equipment, $1 million. A. Rank: 16 B. Name of Sector: SAFETY AND SECURITY EQUIPMENT C. ITA Code: SEC EST. EST. 1993 1994 1995 D. Total Market Size 18.34 23.80 28.56 E. Total Local Production 3.60 4.00 4.40 F. Total Exports negl. negl. negl. G. Total Imports 14.74 19.80 25.00 H. Total Imports from U.S. 2.75 3.20 4.00 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: With a projected growth of 11 percent in the construction industry in the next three years, sales of related safety and security equipment are expected to grow apace. A security and safety plan is required to obtain a building permit for any residential, commercial or industrial establishment. In 1993, the bulk of the total sales for safety and security were concentrated in electronic safety and specialized systems. To ensure quality and reliability, safety and security contractors recommend electronic and computerized systems. Imports satisfy the bulk of demand for safety and security equipment, as local production is limited to manually-operated locks and similar security systems. Most promising subsectors with estimated 1995 market size are Specialized/Computerized Safety and Security Equipment, $10 million; Fire Protection Equipment, $6 million; Communications and Surveillance Equipment, $4 million; and Electronic Detection Equipment, $3 million. A. Rank: 17 B. Name of Sector: ELECTRONIC INDUSTRY PRODUCTION AND TEST EQUIPMENT C. ITA Code: EIP EST. EST. 1993 1994 1995 D. Total Market Size 5.20 7.50 9.75 E. Total Local Production n.a. n.a. n.a. F. Total Exports n.a. n.a. n.a. G. Total Imports 5.20 7.50 9.75 H. Total Imports from U.S. 1.23 1.88 2.50 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: The Philippine electronic components industry has grown gradually in recent years, as foreign manufacturers take advantage of the country's pool of skilled, but relatively inexpensive, labor. Although most firms in this industry still concentrate on the assembly of semiconductor devices, their level of technology has been raised through the purchase of state-of-the-art assembly equipment, such as computerized die and wire bonders. Consequently, more companies are undertaking testing procedures for semiconductor components in order to meet worldwide standards. The industry is also responding to the challenges of stiff competition in the region by focusing on increasing productivity and high quality products. In 1993, major companies such as Amkor Anam (U.S.-Korean), Motorola, Zilog, Rohm Electronics, Pacific Semiconductor, American Microsystems, and Intel embarked on upgrading and expanding their current operations, which contributed to average annual growth rate in the industry of over 20 percent during the past five years. The major electronic products include semiconductors, telecommunications equipment, and electrical machinery. Major markets for Philippine electronics products are the U.S., Japan, Europe and ASEAN countries. Most promising subsector with estimated 1995 market size is Semiconductor Test and Manufacturing Equipment, $8 million. AGRICULTURAL PRODUCTS (Trade Data Sourced from National Statistics Office) I. NO QUANTITATIVE RESTRICTIONS A. Rank: 1 B. Name of Sector: Wheat C. PS&D Code: 0410000 1992 1993 1994 (Thousand Metric Tons) D. Total Market Size 1/ 1,950 2,200 2,500 E. Total Local Production -0- -0- -0- F. Total Exports -0- -0- -0- G. Total Imports 1,950 2,300 2,500 H. Total Imports from U.S. 1,475 1,980 2,100 Comments: Consumption expanding by average 12 pct annually; 7 pct annual growth for food use. Export Enhancement Program (EEP) wheat initiatives every year since 1986. Main competitors: Canada; Australia. A. Rank: 2 B. Name of Sector: Soybean Meal C. PS&D Code: 0813100 1992 1993 1994 (Thousand Metric Tons) D. Total Market Size 1/ 721 786 861 E. Total Local Production 38 66 86 F. Total Exports -0- -0- -0- G. Total Imports 823 650 770 H. Total Imports from U.S. 370 325 350 Comments: Expect steadily rising demand by hog and poultry industries. Rapidly increasing preference for high-protein soybean meal. Strong competition from India. 1/ Reflects estimated consumption and does not take account of changing stock levels. A. Rank: 3 B. Name of Sector: Cotton C. PS&D Code: 2631000 1991 1992 1993 (Thousand Metric Tons) D. Total Market Size 1/ 57 65 80 E. Total Local Production 14 16 17 F. Total Exports -0- -0- -0- G. Total Imports 64 49 60 H. Total Imports from U.S. 45 29 48 Comments: A price market, with strong preference for U.S. cotton based on quality and reliability of supply. Main competitors: Pakistan; Australia. A. Rank: 4 B. Name of Sector: Snack Foods (excluding nuts) C. PS&D Code: None 1991 1992 1993 (US$ Millions) D. Total Market Size 1/ 72 126 130 E. Total Local Production 46 82 84 F. Total Exports 2 2 3 G. Total Imports 24 42 43 H. Total Imports from U.S. 16 27 28 Comments: Rapid demand growth expected to continue; preference for U.S. brands. Market size and local production are rough estimates based on actual trade data and market observations. Exports based on Philippine trade data. Imports based on U.S. Census and Philippine trade data. 1/ Reflects estimated consumption and does not take account of changing stock levels. A. Rank: 5 B. Name of Sector: Fruit (fresh, dried, processed) C. PS&D Codes: 0589905; 0579901; 0574000; 0571120; 0575100; 0575200 1991 1992 1993 (US$ Millions) D. Total Market Size 1/ 221 336 338 E. Total Local Production 703 813 820 F. Total Exports 497 504 510 G. Total Imports 15 21 28 H. Total Imports from U.S. 8 12 13 Comments: Strong demand expected to continue; preference for imported over local fruit based on price competitveness, quality and availability. Figures for market size, local production and exports include all fruits, largely banana and fresh/processed pineapple. Import figures are limited to canned fruit mixtures, dried prunes, fresh apple, fresh oranges, fresh table grapes and raisins. A. Rank: 6 B. Name of Sector: Forest Products C. PS&D Codes: 2470000; 2483020; 2481000; 2482000; 6300000; 6341000; 6341020; 6342000; 6342010 1991 1992 1993 (Thousand Cubic Meters) D. Total Market Size 1/ 1,701 950 1,427 E. Total Local Production 1,561 619 500 F. Total Exports 218 163 137 G. Total Imports 408 576 1,064 H. Total Imports from U.S. 24 34 58 Comments: Local production and exports expected to continue to decline, resulting in increased demand for imports. Good opportunities for hardwood lumber and veneer sales to furniture industry. 1/ Reflects estimated market size and does not take account of changing stock levels. A. Rank: 7 B. Name of Sector: Beef and Veal (fresh, chilled, frozen) C. PS&D Codes: 0111000 H 1992 1993 1994 (Metric Tons) D. Total Market Size 1/ 158,000 160,000 163,000 E. Total Local Production 140,000 141,000 142,000 F. Total Exports -0- -0- -0- G. Total Imports 21,000 24,000 26,000 H. Total Imports from U.S. 348 430 550 Comments: Increasing demand for U.S. choice cuts in major urban areas. All figures carcass weight basis. Total imports largely reflect processing quality beef. Imports from U.S. largely consist of high-quality beef. 1/ Reflects estimated market size and does not take account of changing stock levels. II. NEW MARKET OPPORTUNITIES IN 1995 BASED ON GATT URUGUAY ROUND A. Rank: 1 B. Name of Sector: Pork and Pork Products C. PS&D Codes: 0113000 H 1992 1993 1994 (Metric Tons) D. Total Market Size 710,570 712,914 730,895 E. Total Local Production 710,000 712,000 730,000 F. Total Exports 370 36 105 G. Total Imports 940 950 1,000 H. Total Imports from U.S. -0- 168 200 Comments: Until implementation of Uruguay Round terms, imports strictly limited to a few hotels/restaurants at 100 pct tariff rate. Under Uruguay Round, new low-tariff rate of 30 pct ad valorem for minimum market access quota of 32,520 tons effective July 1, 1995 up to 54,210 tons by July 2004; 100 pct duty for non-quota imports, to be lowered to 40 pct by July 1, 2004. Fast consumer demand growth expected to outstrip domestic supplies. Excellent opportunity for U.S. chilled/frozen pork. A. Rank: 2 B. Name of Sector: Poultry and Poultry Products C. PS&D Codes: 0114000 1992 1993 1994 (Metric Tons) D. Total Market Size 310,245 329,450 349,550 E. Total Local Production 310,000 329,000 349,000 F. Total Exports -0- -0- -0- G. Total Imports 245 450 550 H. Total Imports from U.S. 77 85 100 Comments: Until implementation of Uruguay Round terms, imports strictly limited to a few hotels/restaurants at 100 pct tariff rate. Under Uruguay Round, new low-tariff rate of 50 pct ad valorem for minimum access quota of 14,090 tons effective July 1, 1995 up to 23,490 tons by July 2004; 100 pct duty for non-quota imports, to be lowered to 40 pct by July 1, 2004. Fast consumer demand growth expected to outstrip domestic supplies. Excellent opportunity for U.S. chilled/frozen poultry. A. Rank: 3 B. Name of Sector: Corn and Grain Sorghum C. PS&D Code: 0440000; 0459200 1992 1993 1994 (Thousand Metric Tons) D. Total Market Size 5,100 5,100 5,400 E. Total Local Production 4,750 4,475 4,920 F. Total Exports -0- -0- -0- G. Total Imports -0- -0- -0- H. Total Imports from U.S. -0- -0- -0- Comments: Until implementation of Uruguay Round terms, all feedgrain imports are strictly prohibited unless domestic supplies are certified short by the Agriculture Secretary. Under Uruguay Round: for corn, new low-tariff rate of 35 pct ad valorem for minimum market access quota of 130,160 tons per year effective July 1995 up to 216,940 tons by July 2004, 100 pct duty for non-quota imports, lowered to 50 pct by July, 2001; b) for sorghum, unlimited access at 60 pct duty to be lowered to 40 pct by July 2004. Import demand expected to be large based on strong growth of local hog and poultry industries and high domestic feed costs. Excellent opportunity for U.S. exports; little previous experience with sorghum. A. Rank: 4 B. Name of Sector: Fresh Potatoes (and Other Fresh Vegetables) C. PS&D Codes: 0541000 1991 1992 1993 (Metric Tons) D. Total Market Size 68,100 65,100 68,500 E. Total Local Production 64,600 65,000 68,000 F. Total Exports -0- 12 -0- G. Total Imports 4 -0- -0- H. Total Imports from U.S. -0- -0- -0- Comments: Until implementation of Uruguay Round terms, imports of fresh potatoes strictly limited to seed use at tariff rate of 35 pct ad valorem (effective July 1994). Under Uruguay Round, new low-tariff rate of 50 pct on minimum access quota of 930 tons effective July 1, 1995 up to 1,550 tons at a duty of 40 pct by July 2004; 100 pct duty for non-quota imports, lowered to 40 pct by July 1, 2004. Large estimated demand for U.S. baker-type potatoes. For fresh carrots, lettuce, green peppers and others: no quotas; initial Uruguay Round tariff rate of 50 pct lowered to 40 pct by July 2004. High potential demand during Philippine crops' off-season. SECTOR EXPORT PROSPECTS (US$ million, unless otherwise noted) A. Rank: B. Name of Sector: APPAREL C. ITA Code : APP EST. EST. 1993 1994 1995 D. Total Market Size 1,807.40 2,098.91 2,531.86 E. Total Local Production 2,089.15 2,427.71 2,928.57 F. Total Exports 290.98 339.88 410.00 G. Total Imports 9.23 11.08 13.29 H. Total Imports from U.S. 3.70 4.44 5.33 I. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: Local manufacturers of apparel serve most of Philippine market demand and a portion of the export market. Domestic production is expected to further increase since government vowed to help the garments industry fully realize its export potential. Since garments are among the 15 export winners identified by the government in 1993, the growth and development of the Philippine garments industry will be given priority. As an initial step, tariff rates on raw materials are being lowered to improve competitiveness of Philippine garments. Garments are among the Philippines' major non-traditional export products, with U.S. as its leading market. Imported apparel is sourced chiefly from the U.S., Hong Kong, Indonesia, France and Italy. The U.S., with a 40 percent share of the import market, is the Philippines' major source of imported apparel. For price considerations, end-users of U.S. apparel are in high-income brackets. U.S. apparel is sold in boutiques and duty-free shops throughout the country. Most promising subsectors are Men's and Boys' Trousers, Shorts, etc.; Men's, Boys' Polo, Shirts and Sports Shirts; and Women's and Girls' Blouses, Shirts and Shirt Blouses. A. Rank: B. Name of Sector: COMPUTER SOFTWARE C. ITA Code : CSF EST. EST. 1993 1994 1995 D. Total Sales n.a.* n.a n.a. E. Sales by Local Firms n.a. n.a n.a. F. Sales by Foreign-Owned Firms n.a. n.a. n.a. G. Sales by U.S.-Owned Firms n.a. n.a. n.a. H. Exchange Rate (in Pesos/US$) 27.12 27.40 28.70 Comments: Local demand for computer software is still limited partly because the Philippine government's computerization effort is proceeding at a slow pace. This is in turn due to budgetary constraints. The growth of the sector is also hampered by the perception that software is free. There are about 80 software houses and EDP consultancy firms in the country. Presently, exports comprise about 90 percent of their business and their target is to register an export service revenue of US$ 300 million by 1998. The Philippine software industry aims to be the leading software exporter in Southeast Asia and provider of high- end, state of the art Information Technology products and services. The Philippines is encouraging overseas investors to establish their computer software business in the Philippines, particularly for the export of their services. The market is not dominated by any key player. No one has exclusive access to the distribution channels thus, there are no significant entry barriers. Quality of product and reputation of the firm are the most important requirements for any new entrant into the market. Among foreign suppliers, U.S. is the major player. U.S suppliers, however, need to review their prices to remain competitive. U.S. suppliers should note that piracy is a big problem in the country despite efforts of the Philippine government to address the problem. Most promising subsectors are Anti-virus Software, Banking Software, Database, Desktop Publishing, Imaging Software, Mainframe and Minicomputer Network and Application Software, Multi-media Software, and Utilities. * n.a. - Not available. Market figures are not available as no specific government agency monitors the market for this service sector and trade sources declined to make estimates. APPENDIX C