EDITORIAL (Buddy G. Recio)
Last month, news on Duty Free Philippines (DFP) stores closing down was circulated on the major media outlets. Aside from the initial shock, the instant reaction to its closure notice was that there is corruption involved in this agency, a bias all other government agencies face when they become short of funds.
A closer look will dictate, however, that unlike most other agencies, especially those that rely on rentals and taxes, DFP does not have a milking cow. It is a self-sustaining GOCC and it gets its revenue solely from selling merchandise from suppliers purchased by inbound and outbound tourists. They are the only customer source.
In 2018, its consolidated sales were US$217 million contributed largely by a record-breaking increase of 12.7% foreign tourists from the previous year. This positive development pushed the DFP Board of Directors, chaired by the DOT Secretary, to make expansion plans.
In November 2018 The Luxe Duty Free was opened in the SM MOA complex to house upscale and high-end retail products and brands. Duty Free outlets in major Philippine international airports also opened with a plan top open on all international airports. In 2019, sales grew to US$226 million (+4%). NAIA Terminals 1, 2, and 3 holds 53%, Fiesta Mall which recently showcased its renovated spaces is at 30%, and provincial outlets with 15% (Cebu at 7%) so far, make up its sales profile. Adapting to the latest trends, Duty Free Philippines Corporation (DFPC) has also entered the online shopping realm in 2018 after a five-year delay.
Enter the pandemic
The COVID 19 pandemic put a damper on all these plans. Starting in December of 2019, when the virus broke out in China. This canceled most of the grand Chinese New Year celebrations from January to February, then lockdowns were imposed, the flights stopped, and the airports closed. DOT data showed that international arrivals from Jan to May 2020 dropped 62.21% from 3.49M to 1.3M with revenues down from PhP205.50 billion to PhP81.05. Consequently, DFPC also started losing revenue in February, reaching only 24% less of its original monthly target of US$18.8 million. It is expected to lose more.
With no business opportunity, DFP closed its stores temporarily on March 17, just opening again this June 15.
The Duty Free Board has foreseen this long term predicament when lockdowns were enforced and has taken action by informing the relevant government agencies of its plight. As early as April, DFPC’s recommendations were sent for necessary action. Unfortunately, their plea has not been taken up or given much attention. Among their suggestions were to manage 150 to 200 employees only from a current employee base of 834. Another proposal was to open the stores to the public for the duration of the lockdown period. With the DFP Union in protest of this, DFPI management has issued a reply last May to address their concerns.
Sources from the Duty Free imparted to Travel Update that the board has also proposed that they be included in the “Bayanihan To Heal” program in order to qualify for a subsidy and carry on operations and pay its monthly dues and monthly salaries of employees, but did not get any form of reply. Unfortunately, the government program has expired, and with that the chance to get needed funding.
Why Duty Free matters
The Duty Free has always been a source of authentic imported merchandise at tax-free rates that provides a convenient fallback in avoiding counterfeit goods and knock-offs that are rampant nowadays as online sellers, resellers, and pop-up stores offer a variety of choices from class A to AAA that are all fakes. It is also a refuge, especially for the families of OFWs, to see the products and great brands of various merchandise in a “shopper-friendly “ setting. Well-curated domestic produce also began its showcase under the Go Lokal section as a convenient way for visitors, especially foreign tourists and Balikbayans to bring world-standard Philippine goods.
The OFW mandate
Duty Free has always put the OFW in mind, so most products are mostly imported and a number of merchandise are primed for Kabuhayan shopping, DFPC’s livelihood program for OFWs. It ensures OFWs and Balikbayans who plan to go into entrepreneurship a chance to avail of duty and tax-exempt purchases in the amount of US$2,000 exclusively for livelihood equipment within 15 calendar days from the date of arrival and extended to 30 working days for those who come home from 15 November to 15 January.
The Kabuhayan program is a long-running project for OFWs to assist their families in a continuing livelihood program when the OFW retires or goes back overseas.
From a previous interview, DFPC COO Vicente Pelagio Angala stated: “For the OFWs, we are actually expanding our Kabuhayan shopping. It was already there when I assumed office but it wasn’t given due attention. The aim was to give something to your family to continue after the OFW retires or as an alternative to working abroad again. We are aiming to source for more. Training will be done through our partnership with TESDA. For the products of Fuji Denso and Whirlpool, their people will guide you where to source the detergents, etc. At the POEA, we partner with them to be included in their pre-departure orientation.”
Dare to be a bit different
Several measures are being proposed for DFP to be relevant to the times like cashless payments being encouraged to reduce physical contact and shorten queues.
Improved online setting focused on senior citizens who are given a longer privilege of up to one year from the date of the last arrival.
It is unthinkable to think that Duty Free Philippines should close down. It is even more foolhardy to presume that it is caused by corruption. In fact, I believe that gumption on the part of the present Board should be encouraged more for it to rise above these challenging times.