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From a macro perspective, 2014 has been a positive year for the food and beverage (F&B) sector in the major markets of Southeast Asia, Hong Kong and Taiwan. 
In the retail sector we are seeing a healthy appetite from buyers for listing new and exciting products.
 
In the food service sector, there is strong demand for products that offer quality solutions at a lower cost or in a faster, more convenient manner. Even Quick Service Restaurants, such as McDonalds or KFC, recognise that in many cases, incorporating imported products into their menus gives them an edge in this ultra-competitive industry, despite the slightly increased cost.
 
Unfortunately, despite these positive trends, external factors are significantly curtailing growth in some key markets. 
 
I was in the Philippines and Thailand this month. Having been there just two months earlier, I was dismayed to see that the issues plaguing the F&B import/export sector have exacerbated rather than been resolved in these typically high growth markets.
 
 
No thriller in Manila
In an effort to curb rampant Customs violations on commercial goods entering the country, the Philippines Bureau of Customs (BOC) issued a notice on 29 May, 2014 regarding changes to it’s import regulations.The changes are likely to impact the majority of New Zealand exporters sending goods to the Philippines.
 
The BOC plans to impose a new requirement for a Load Port Survey Report (LPSR) on commercial goods being shipped to the Philippines. The roll out was pegged for 1 July, 2014. However, implementation has now been delayed due to operational issues at the Port of Manila – more on that shortly.
 
The LPSR must be carried out at a Port of Loading (POL) by a cargo surveyor accredited by the BOC.
 
There are only two approved bodies in New Zealand: SGS and Bureau Veritas (BV). The cost can range from around $150 to $450, depending on your export volume and POL location. Who bears this cost is up for negotiation, but ultimately, it’ll be the Filipino consumer. This is not good news in a market that already suffers from extreme price sensitivity.
 
An LPSR also adds another layer of complexity when it comes to exporting to the Philippines and given the process was not straight forward to begin with, many suppliers are exasperated by this requirement.
 
On a positive note, it does appear that some imports might be exempt – LCL loads and air freight, for example. However, due to conflicting information coming out of the BOC, this is still unclear.
 
Meanwhile, ‘Truck Ban’ trouble at the Port of Manila has been causing big problems for both importers and exporters, as port congestion became a major issue.
In a not-so-brilliant scheme to alleviate traffic congestion, the Manila City Government implemented a ban on heavy vehicles using roads during business hours. This effectively reduced clearance patterns at the Port from four or five loads a day to just one. 
 
The net result was a port brimming with uncleared containers, vessels being sent back to their origin ports and even the local QSR fried chicken franchise, Jollibee, running out of chicken. 
 
After five months of madness, the Mayor of Manila announced that the Truck Ban would be lifted on 13 September, 2014 – so, at the time or writing, pressure at the port is slowly easing.  
 
 
Thailand’s political crisis
Anyone who’s been to Thailand on business this year will be well aware of the challenges all sectors are facing as a result of the ongoing political crisis. 
Trouble has been brewing in Bangkok since November 2013 and anti-government protests culminated in a military coup d’etat in May this year. 
 
International travel warnings and sensationalised media coverage led to a drastic downturn in international visitor numbers, hammering the hospitality and tourisim sectors and causing multimillion dollar losses for F&B distributors.  
 
Today, the Thai business people I work with assure me that the coup was necessary to ‘clean up Government corruption’ and that everyone feels much safer under the current military rule. However, they can’t ignore the damage that has been done to their P&L statements. 
 
Last week, my hotel in Bangkok resembled a ghost town and it was common knowledge that some major international hotel chains are down to ten percent occupancy. They have therefore been forced to lay of staff or put them on unpaid leave to cope with the losses.
 
In turn, companies that supply these hotels have seen purchase orders that would normally run to ten pages of stock, shrink to two or three pages. 
With the high season beginning in October (through March) importers are desperately hoping that the tourists will return and hotels will once again start ordering their products in greater volumes.
 
In other Thailand news, increased taxes on businesses, particularly companies involved in the luxury goods sector, have forced some importers that have been trading for decades to consider whether it’s time to close up shop. 
 
The wine sector, in particular, has been hit hard. Already struggling to cope with last year’s changes to the tax laws (which meant that excise tax was payable on the wholesale price of the wine, rather than the standard CIF rate) importers now fear that a further change will mean that tax is calculated on the retail price of the wine. 
 
Effectively, what this means is that the importer is paying excise tax on the entire margin chain. Under such circumstances and with a rampant black market, it’s difficult to see how the industry will absorb these new tax increases. 
 
While it’s true that Southeast Asian economies, such as Thailand and the Philippines, will achieve high levels of economic growth over the long term, unfortunately, with the good comes the bad. Exporters will need to take a balanced view of each market to truly understand the opportunities available.
 
 
 
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