Bernardo M. Villegas
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Philippine Emerging and Submerging Industries (Part 1)

          Without doubt, the consumer-oriented industries will lead in the V-shape recovery that I expect the Philippine economy to experience after we lick COVID-19.  Once there is more freedom of movement of people, goods and services (of course, with a new normal of widespread safety measures and safeguards like the wearing of masks and social distancing), consumption expenditures will lead the recovery since they represent more than 70 percent of the entire GDP.  There are at least seven leading sectors to which the so-called Fast Moving Consumer Goods (FMCG) belong.  In my vocabulary they are represented by the seven Fs:  Food, Fashion, Furnishings, Fun (entertainment and tourism), Fitness (health and wellness-related products and services), “Facebook” (all digital goods and services); and Formation (all forms of human resource development such as formal,  nonformal and informal education).  Let us start with “Food.”  Even in the darkest moments of the lockdown, the food industry was already the rising star or sunrise industry.  This is to be expected since food can represent anywhere from 20 to 50 percent of the family budgets depending on the income levels of the consuming households.  The food industry  will grow at the fastest rate once the Philippine economy starts to recover from the slowdown caused by the lockdown.

   The entire agribusiness sector will lead in the economic recovery. This sector will include farming, post-harvest, logistics, manufacturing, retailing (supermarkets, wet markets, sari-sari stores) and restaurants (once they are allowed to accept dine-ins and not only take-outs).  In fact, as long as we will not be hit by the  El Nino or La Nina weather phenomenon, I expect the agricultural sector to post a historically above-average growth rate of 3 to 4 per cent for 2020.    Food manufacturing could grow at 7 % while food retailing during the second semester can rise at 6% or more. As a recent study of Nielsen concluded, the Philippines will be an exception to the possible post-pandemic trend of households in Asia choosing to purchase goods to eat at home rather than to dine out.  In the Philippines, figures showed that consumers are among the least likely to change their eating habits when the COVID-19 crisis is over.  Eating outside for most Filipino households is not just a nutritional exercise.  It is part of the culture of bonding with family and friends, celebrations, fiestas, entertainment and relief from the drudgery of daily work.  As long as restaurateurs are determined to reconfigure their physical designs and operations to incorporate safety measures, I am confident that dining out will bounce back quickly, if not in the second semester of 2020, at the beginning of 2021.

     We should neither underestimate what can happen to the drive for urban gardening when a good number of those who will be laid off from the troubled sectors like tourism and travel may actually decide to grow high-value crops on relatively small plots right in the middle of the National Capital Region or at least in the nearby CALABARZON or Central Luzon regions.  There are even real estate developers who are suggesting that high-value vegetables should be grown on top of condominium towers in business districts like Fort Bonifacio, Makati or Ortigas Centre.   A top agriculturist from U.P. Los Banos, Pablito Malabanan Villegas, has already put up a training centre in Malvar, Batangas, to produce agribusiness technicians who can be employed by those who will take urban gardening seriously as a profitable venture.  These urban gardens of high-value crops can also fit very well into the agri-tourism campaign being promoted by Secretary of Tourism Bernadette Romulo Puyat.    Another  distinctive advantage of the agricultural sector is that it is now being led by a very competent and pro-active Secretary of Agriculture in the person of Dr. William Dar.  Secretary Dar is also giving his strong support to urban gardening.

         What about the other six Fs among the FMCGs?  Let us start with Fashion.  Will there be a strong demand for fashion goods after the economic shock of the two or three-month lockdown?  My gut feel tells me that except at the highest income level, which constitutes 1 percent of Philippine households, there will be a muted demand for expensive fashion brands. The fashion sector will be the first among the “submerging industries” in the post-COVID economy.  Most middle-income or low-income households will make do with their existing wardrobe and focus their expenditures on basic non-food goods or services such as education, health, housing (especially amortisation for house and lot or a condominium unit), transport services, and insurance. A possible exception would be the demand from middle-income consumers, especially among women, for more aesthetic forms of face masks.  As mentioned above, some garments manufacturers are already shifting to the fabrication of Personal Protective Equipment (PPE).

     An informal research done by the Global Executives Solutions Group (an executive search firm) came out with  the following top ten consumer items that will be priorities among Philippine households in their spending behaviour after  the ECQ:  Basic grocery food; medicine; personal care; fresh/frozen food; bills payment; household care; protective items (alcohol, gloves, masks); food/drinks from eat out establishments;  non-basic grocery food (snacks, liquor); and medical service (checkup, consultation ).  The same research came out with what will be the emerging and submerging industries post-COVID-19.  The emerging ones are medical devices and supplies; hygiene products and cleaning materials; hospitals, healthcare and insurance; pharmaceuticals and over-the-counter (OTC) retail; E-commerce/IT digital services; health and wellness; logistics and delivery; online gaming/entertainment; telecommunications/internet provider; social media/digital media; supermarket retail; utilities and power; online banking and remittance; home and appliances; and mobile devices.  Among the submerging industries are luxury items; airline/cruise; tourism and hospitality; mall retail/clothing retail; condo real estate;  automobile; sports facilities; and transport.

         The third F, Furnishing stands for the total demand for the consumer durable goods that go  into a residential home, i.e. furniture, home appliances, air conditioning units, etc.   Because of a significant drop in savings among the middle-class households during the lockdown, there is an expected temporary decline in the demand for social and economic housing which comprise condominium units or detached housing units ranging from P1 to P6 million per unit.  Thus, there will no significant increase in the demand for  furnishings for newly completed residences.  Neither will there be purchasing power for additional furnishings in existing homes in the same way that there will be little effective demand for new automobiles.  The only exception  could be a new demand for distinctive forms of home furnishings that would be made necessary by the increasing practice of work being done at home.  Most of us who are working at home with laptops and other digital devices have to use furniture that are ill-suited to working comfortably at home.  Some enterprising furniture makers may actual design pieces of furniture and accessories that can render more comfortable the conduct of  frequent online courses, webinars, and other internet-related activities that are being transferred from the workplace to the homes of workers.  Otherwise, home furniture will not be a priority expenditure in a post-pandemic environment.