Required Report - public distribution

**Date:** 6/20/2005

**GAIN Report Number:** RP5024

RP5024

**Philippines**

**Solid Wood Products**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)David C. Miller

FAS Manila

**Prepared by:**

Perfecto G. Corpuz

**Report Highlights:**

The devastation brought about by mudslides in December 2004 has forced
the Philippine Department of Environment and Natural Resources (DENR) to
impose stricter logging and forest products transport regulations. The
disaster also resulted in a review of existing forestry laws by the GRP.
Pending results of the review, tighter guidelines are expected to govern
local timber cutting and wood use. Because of this, solid wood
production is expected to contract through 2006, providing positive
prospects for increased U.S. wood exports, in particular, for use by the
local furniture and interiors sectors.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Manila \[RP1\]

\[RP\]

#### Summary {#summary-1}

Official data on forest cover and timber production is not readily
available, but the Philippine forest resource is expected to continue
its decline through 2006. A series of devastating typhoons, and the
ensuing mudslides in Central Luzon in December 2004, exposed the
seriousness of unabated deforestation activities, both legal and
illegal, in the Philippines. The disaster, and its effects on major
stakeholders, has forced the GRP to review existing forestry laws.
Revising Philippine forestry policy, however, ideally will need a
national land-use code for the guidance in classification of Philippine
lands. A new and comprehensive forestry law is expected to be more
environment-friendly. In the meantime, and pending results of the
review, the Department of Environment and Natural Resources (DENR) is
imposing tighter regulations on forest product harvesting and local wood
use. While this situation widens the window for increased U.S. forest
product exports, new taxes and increasing manufacturing costs, are
expected to dampen any significant increase in overall wood demand over
the next two years. The Philippine solid wood market, in general terms,
is likely to contract over the next two years because of this, with the
furniture and interiors sectors expected to remain the niches that offer
the best prospects for increased U.S. wood exports. These prospects will
be made more positive if the GRP were to grant the industry's duty-free
request for lumber, veneer and wood panel imports.

#### Production

-   Forest Situation & Outlook

# Official Philippine forestry statistics are provided by the Forest Management Bureau (FMB) of the Philippine Department of Environment and Natural Resources (DENR) at:

#  

# [**http://forestry.denr.gov.ph/stat2003.htm**](http://forestry.denr.gov.ph/stat2003.htm)

The most recent statistics, however, are only through CY2003. Forest
areas and cover are expected to continue shrinking through 2006 with
timber removals and annual allowable cut (AAC) expected to follow this
declining trend. Indicative of this are the recent environmental
disasters that otherwise would not have happened had there been ample
forest cover or trees in areas classified as forests.

Successive typhoons from November to December last year resulted in
massive floods and mudslides in Aurora and Quezon provinces on the main
island of Luzon, causing significant damage to property and loss of
human lives. In response, President Gloria Macapagal-Arroyo instructed
the DENR to order the suspension of all timber cutting throughout the
country. The President also asked Congress to review a bill filed in the
late 1980s that called for a total logging ban nationwide for 25 years.

The DENR log ban was partially lifted early this year. More information
on that issue is available at:

<http://www.pwpa.org.ph/index_newsview.php?idx=63>

Despite the order, the confiscation of illegally cut logs still
continues, as reported by local media, and the DENR has responded by
increasing its vigilance. It has also initiated

a study of the possibility of limiting logging operations to 2-3 regions
while prohibiting timber harvests elsewhere. Refer to:

<http://www.denr.gov.ph/article/articleview/2751/1/349/>

In the recently-concluded first Philippine Forestry Development Forum
held in Manila at the Asian Development Bank (ADB), forestry experts and
industry players expressed concern over the DENR's forestry policies
which they regard as creating uncertainty among major stakeholders. They
cite the absence of a comprehensive forestry law as a major shortcoming
and reportedly submitted a proposal to President Arroyo and the
Philippine Congress urging the GRP to classify lands into specific
production forests and/or protected areas. The proposal likewise urged
Congress to act on the Sustainable Forest Management Bill and the
National Land Use Code, two bills that have been pending in the
legislature since 1998. What is currently being implemented, according
to media reports, is the 30-year old Revised Forestry Code, which many
consider to be obsolete. To efficiently classify Philippine land, be it
forest or non-forest, a clear land-use policy is required.

While the DENR has reportedly maintained a vigilant outlook for illegal
loggers, some wood users have complained that overzealousness in
regulating the movement of forest products is causing delays in the
procurement of local wood (refer to Furniture and Interiors Market
Segment).

-   Solid Wood Products & Outlook

Forest products production and price information for 2004 is provided
at:

<http://forestry.denr.gov.ph/designated.htm>

Applications to operate new wood processing facilities, e.g. sawmills
and mini-sawmills, plywood and veneer plants, have been suspended since
2003 as most sawmills and mini-sawmills had reportedly been identified
as utilizing illegally-sourced logs. In general terms, production of
Philippine wood products is expected to contract considerably this year,
and further shrink the following year as the GRP intensifies efforts to
curb illegal logging, which is the likely source of a considerable
portion of the country's wood supply. As a result, the number of wood
processing plants and their output of logs, lumber, veneer and plywood,
is expected to decline from the 2004 level.

The local wood products industry association is the Philippine Wood
Producers Association (PWPA) whose member companies and their
corresponding product lines are provided at the following link (enter
logs, lumber, plywood or veneer to search for specific items).

#### [**http://www.pwpa.org.ph/marketplace_service_search.php**](http://www.pwpa.org.ph/marketplace_service_search.php)

The monthly manufacturing output by volume for wood and wood products as
well as furniture and fixtures through February 2005 is provided at the
following link:

<http://www.bsp.gov.ph/statistics/spei/tab40.htm>

#### Trade 

DENR acknowledges the difficulties in curbing illegal logging. In a
statement submitted to the G-8 Environment and Development Ministers
Meeting in the United Kingdom in March 2005, DENR Secretary Michael
Defensor reportedly asked the G-8 member-nations to ban the entry of
illegally-sourced lumber and wood products into their respective
markets. Currently, however, a system implementing a forest stewardship
certification system is not in place, and the GRP's severe lack of
resources constrain effective enforcement of such a desired eco-labeling
forestry regime.

The GRP is currently conducting a review and hearings on MFN tariffs for
2006 onwards. As such, 2005 MFN import duties for forest and wood
products remain at the levels reported in GAIN RP 4035. During public
hearings, local furniture manufacturers have been very vocal in pushing
for tariff-free privileges for lumber, veneer, and solid wood panels
imports (refer to Furniture and Interiors Market Segment). Any tariff
changes are likely to be announced before the end of 2005, and are
expected to be aligned with the forest policy currently being crafted.

The PSD table trade numbers for 2004 are Post estimates, which
approximate WTA data. The factors affecting solid wood products trade
are enumerated in the specific wood market segments. While there are
expected shifts in solid wood import patterns, in general, the
Philippine forest products market is expected to contract through 2006.

# Market Segment Analysis 

The 2003 and 2004 GNP and GDP performance (at constant 1985 prices) by
industrial origin and expenditure share is provided at:

[http://www.neda.gov.ph/econreports_dbs/NIA/GNP_GDP/FY\_%202004_29Janv2_Summary
TableNIA.xls](http://www.neda.gov.ph/econreports_dbs/NIA/GNP_GDP/FY_ 2004_29Janv2_SummaryTableNIA.xls)

Provided in the table below are the 2005 first quarter growth rates with
textual descriptions provided in:

<http://www.nscb.gov.ph/sna/2005/1stQ2005/2005qpr1.asp>

+---------------------------------+-----------+-----------+-----------+
| **Growth Rates (Percentage      |           |           |           |
| calculated**                    |           |           |           |
|                                 |           |           |           |
| **at constant 1985 prices)**    |           |           |           |
+---------------------------------+-----------+-----------+-----------+
| Sector                          | 2005 Q1   | 2004 Q1   | 2004 Q4   |
+---------------------------------+-----------+-----------+-----------+
| Agri-Fishery                    | -0.1      | 8.6       | 1.4       |
+---------------------------------+-----------+-----------+-----------+
| Agriculture and fishery         | 0.1       | 8.3       | 1.4       |
+---------------------------------+-----------+-----------+-----------+
| Forestry                        | -40.5     | 96.5      | -47.9     |
+---------------------------------+-----------+-----------+-----------+
| Industry                        | 4.2       | 4.7       | 7.2       |
+---------------------------------+-----------+-----------+-----------+
| Mining and quarrying            | -4.4      | 21.7      | 1.5       |
+---------------------------------+-----------+-----------+-----------+
| Manufacturing                   | 4.2       | 3.9       | 7.4       |
+---------------------------------+-----------+-----------+-----------+
| Construction                    | 7.9       | 1.7       | 9.2       |
+---------------------------------+-----------+-----------+-----------+
| Electricity, gas, water         | 5.6       | 5.1       | 5.2       |
+---------------------------------+-----------+-----------+-----------+
| Services                        | 6.9       | 6.6       | 5.9       |
+---------------------------------+-----------+-----------+-----------+
| Transport & communications      | 9.6       | 9.2       | 9.6       |
+---------------------------------+-----------+-----------+-----------+
| Trade                           | 6.0       | 7.1       | 5.8       |
+---------------------------------+-----------+-----------+-----------+
| Finance                         | 11.1      | 7.0       | 8.0       |
+---------------------------------+-----------+-----------+-----------+
| Real estate                     | 6.8       | 4.0       | 3.9       |
+---------------------------------+-----------+-----------+-----------+
| Private services                | 4.6       | 6.5       | 6.5       |
+---------------------------------+-----------+-----------+-----------+
| Government services             | 4.3       | 3.5       | -1.8      |
+---------------------------------+-----------+-----------+-----------+
| **Gross domestic product**      | 4.6       | 6.4       | 5.4       |
+---------------------------------+-----------+-----------+-----------+
| **Gross national product**      | 4.7       | 6.4       | 5.6       |
+---------------------------------+-----------+-----------+-----------+

Source: National Statistical Coordination Board

For the entire calendar year 2005, the Arroyo administration is
projecting GDP growth at between 5.3-6.3 percent, and to settle within a
range of 6 percent to 7 percent in 2006 and 2007. The International
Monetary Fund (IMF) and ADB, however, expect growth at a slower rate
during this period.

From P186 billion (\$3.4 billion at P55/\$) or 3.8 percent of GDP in
2004, the GRP is hoping to narrow its budget deficit to 3.6 percent of
GDP with the implementation of President Arroyo's Republic Act 9337 (RA
9337) or the Expanded Value-Added Tax Act of 2005 (refer to GAIN RP
5020). RA 9337 takes effect July 1, 2005 and lifts the VAT exemptions
previously enjoyed by several industries (including power and
electricity, air and sea transport, and the sale of forest products).
Prior to RA 9337, new taxes on alcohol, tobacco and petroleum products
were also imposed. GRP economists reportedly believe the new taxes will
generate an estimated \$1.94 billion in additional tax revenue next
year, and help the GRP meet its debt obligations.

A. Construction Sector

The growth in the local Business Process Outsourcing (BPO) industry last
year enhanced demand for real estate and office space and likely led
private construction activities. As of the end of 2004, the Philippines
reportedly had more than 70 call centers, 80 percent of which are
located in Metro Manila.

A summary of private building construction for the past five years
follows:

<table>
<colgroup>
<col style="width: 6%" />
<col style="width: 8%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 8%" />
<col style="width: 6%" />
<col style="width: 6%" />
<col style="width: 8%" />
<col style="width: 3%" />
<col style="width: 3%" />
<col style="width: 3%" />
<col style="width: 3%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="15"><p
id="number-floor-area-value-by-type-of-private-building-construction"
class="heading">NUMBER, FLOOR AREA, &amp; VALUE BY TYPE OF PRIVATE
BUILDING CONSTRUCTION</p></td>
</tr>
<tr class="even">
<td colspan="9">(Value in billion Pesos, floor area in thousand
sq.m.)</td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="3">Residential</td>
<td colspan="3">Non-Residential</td>
<td colspan="5">Additions/Alterations</td>
<td colspan="3">TOTAL</td>
</tr>
<tr class="even">
<td>Year</td>
<td>No.</td>
<td>Floor</td>
<td>Value</td>
<td>No.</td>
<td>Floor</td>
<td>Value</td>
<td>No.</td>
<td colspan="2">Floor</td>
<td colspan="2">Value</td>
<td>No.</td>
<td>Floor</td>
<td>Value</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td>Area</td>
<td></td>
<td></td>
<td>Area</td>
<td></td>
<td></td>
<td colspan="2">Area</td>
<td colspan="2"></td>
<td></td>
<td>Area</td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>2000</td>
<td>47,911</td>
<td>4,989</td>
<td>24.60</td>
<td>7,647</td>
<td>5,115</td>
<td>37.11</td>
<td>14,878</td>
<td colspan="2">517</td>
<td colspan="2">8.22</td>
<td>70,436</td>
<td>10,620</td>
<td>69.76</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>2001</td>
<td>50,276</td>
<td>5,883</td>
<td>28.77</td>
<td>8,214</td>
<td>4,557</td>
<td>79.85</td>
<td>15,596</td>
<td colspan="2">615</td>
<td colspan="2">8.13</td>
<td>74,086</td>
<td>11,056</td>
<td>166.75</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>2002</td>
<td>63,516</td>
<td>7,080</td>
<td>36.38</td>
<td>10,441</td>
<td>5,090</td>
<td>41.28</td>
<td>17,514</td>
<td colspan="2">611</td>
<td colspan="2">8.26</td>
<td>91,471</td>
<td>12,781</td>
<td>85.92</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>2003</td>
<td>66,308</td>
<td>7,968</td>
<td>42.08</td>
<td>10,715</td>
<td>5,032</td>
<td>31.13</td>
<td>18,867</td>
<td colspan="2">2,194</td>
<td colspan="2">7.41</td>
<td>95,890</td>
<td>13,608</td>
<td>82.21</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td>2004</td>
<td>71,918</td>
<td>8,543</td>
<td>49.95</td>
<td>11,187</td>
<td>5,747</td>
<td>40.03</td>
<td>19,536</td>
<td colspan="2">588</td>
<td colspan="2">9.51</td>
<td>102,641</td>
<td>14,878</td>
<td>99.49</td>
</tr>
</tbody>
</table>

Note: Totals may not add up due to rounding.

Source of Basic Data: National Statistics Office

Information on the Philippine housing market may be found at:

<http://www.hudcc.gov.ph/index.php?id1=6>

Guidance and regulations for all Philippine buildings and structures are
provided in Republic Act No. 6541 or the National Building Code of the
Philippines.

<http://www.chanrobles.com/republicactno6541.htm>

Details on the upcoming (Nov. 13-15, 2005) 15^th^ Philippine
International Construction Equipment and Building Materials Exhibition
and Technology Forum follows:

<http://www.philonline.com.ph/~webdev/GlobalLink/PhilConstruct/philConstruct_index.htm>

According to the National Economic Development Authority (NEDA), for the
first quarter of 2005, private construction grew 5.8 percent from the
same period the previous year, as developers capitalized on low interest
rates. Sustaining this growth will likely depend on the continued
expansion of call centers, as housing demand will be dampened by the
increasing prices of labor and construction materials. Housing
unit-prices are likely to increase further starting the second half of
this year, and accelerate in 2006 as the effects of the higher VAT
become more pronounced. This will compound existing price considerations
and misconceptions about the strength and durability of wood as a
construction material, as well as further dampen imports of wood
materials for exterior and structural purposes in the construction of
call centers. But since call centers in the Philippines are mostly
offices of foreign multinational companies, they are often high-end in
nature, are not as price-sensitive in terms of office space rental
compared to firms catering to the local market. The interiors and
furniture requirements of newly constructed BPO offices, therefore,
offer the brighter prospects for more wood use in the next 2--3 years.

B. Furniture and Interiors Sector

A report cited on the Chamber of Furniture Industries of the
Philippines' (CFIP) website and funded by the Canadian International
Development Agency (CIDA) entitled "The State of the Sector Report on
Philippine Furniture, 2004" provides new and comprehensive information
on the state and direction of the Philippine furniture industry. It may
be downloaded at:

# 

# [**http://cfip.com.ph.16.m6.net/dll/PEARL2%20State%20of%20the%20Sector%20Report.pdf**](http://cfip.com.ph.16.m6.net/dll/PEARL2 State of the Sector Report.pdf)

The Philippine International Furniture Show (PIFS) is the premier
furniture show in the country and indeed many overseas furniture buyers
consider the Philippines to be a center for creative furniture design in
Asia. Details on the PIFS and other furniture shows follow:

<http://cfip.com.ph.16.m6.net/events/trandex-index.asp>

Effects of the December 2004 floods and mudslides, as well as the
position of the CFIP on the proposed total log ban may be accessed in:

<http://cfip.com.ph.16.m6.net/news/default2.asp?getsect=Industry&getID=62>

Exported Philippine furniture is manufactured by roughly 2,500 furniture
companies in the Philippines, with about 98 percent considered to be
small-to-medium scale operations, according to industry contacts. Only
two percent or approximately 50 are considered large furniture-exporting
firms, with about five U.S. companies exporting an estimated 75 to 80
percent of their finished products back to the United States. These
large furniture makers-exporters import most of their wood requirements
because of the unreliability of supply of domestic wood. Alder, ash and
oak are popular U.S. wood species and other temperate hardwoods are
reportedly gaining popularity because of consistency in supply. The
preferred wood grain varies, according to industry contacts, depending
on the furniture to be manufactured.

While the furniture and interiors sectors continue to hold the most
promise for increased U.S. wood sales, the local industry faces many
challenges. Recent wage increases, coupled with the new taxes under RA
9357, will inevitably increase wood prices, and consequently furniture
manufacturing costs. The increase in corporate income tax is also of
particular concern to big furniture manufacturers and exporters. While
most domestic furniture makers are small to medium-scale in size, the
larger firms are those that export significant quantities of furniture,
and are therefore major wood importers. According to the American
Chamber of Commerce of the Philippines, Inc., the impending increase in
corporate income tax will make the Philippines the country with the
highest corporate tax in the region.

The higher taxes will likely affect the competitiveness of the local
furniture industry, and consequently affect wood trade, next year
onwards. Dampened global demand and increased competition in 2005, are
expected to slow furniture exports during the period.

The abovementioned challenges, however, give credence to the request by
the local furniture industry for the GRP to eliminate tariffs on
imported lumber and other wood products. CFIP claims zero-tariffs for
lumber imports would alleviate the current problematic disruption of
wood supply. With a zero-duty regime, importation would be less
cumbersome, according to CFIP, as it currently takes between a month and
three months to obtain all the requirements for the cargoes to come in
through the ports. CFIP notes that while current MFN tariffs for
imported lumber are at 7 percent, imported furniture may be enjoying a
zero-tariff privilege by 2007 under the Common Effective Preferential
Tariff (CEPT) scheme of the ASEAN Free Trade Area (AFTA). CFIP is also
pushing for duty-free importation of veneer and wood panels from the
current 7 percent and 5-10 percent MFN duties, respectively. The
tariff-free privilege is expected to be of significant advantage to U.S.
lumber and veneer exports as the prevailing CEPT rate is at 3 percent.
More information on the CEPT is provided in:

<http://www.tariffcommission.gov.ph/afta-cep.html>

C. Material Handling Industry

GRP and private analysts agree that, in general terms, robust domestic
demand in 2004 contributed to the growth in manufacturing and the
economy as a whole. Increasing oil and consumer prices have not abated,
rather it has forced the Bangko Sentral ng Pilipinas (BSP) to raise its
full-year inflation forecast for the 4^th^ time recently (now at 7.9
percent). Prices are expected to increase further through 2006 and are
expected to dampen growth in personal consumption and overall demand.

Consistent with the feeble manufacturing output in the first quarter of
this year, export growth weakened as global demand slowed. The
deceleration of manufacturing activity in the first three months is a
likely indication of how the sector will perform for the entire 2005.
This infers a corresponding slowdown in demand for packaging materials
this year.

The Philippines is a party to the International Plant Protection
Convention (IPCC) and must comply with the International Standards for
Phytosanitary Measures or ISPM 15. In October 2004, the Bureau of Plant
Industry (BPI) issued Administrative Order 1 (BPI-AO 1) or the
Guidelines for Regulating Wood Packaging Material Involved in
International Trade. BPI-AO 1 provides that:

1.  All shippers or exporters using wood packing materials (WPM) should
    complete an application form for WPM prior to exportation at least
    72 hours before treatment.

2.  For destinations that do not implement ISPM 15, inspection should be
    deemed sufficient until the destination decides to implement the
    standard.

3.  Treated WPMs should be properly secured after treatment to avoid
    recontamination/re-infestation.

4.  Treated WPMs should bear the approved mark indicating the date of
    the treatment, code and the kind of treatment used.

5.  Treatment of WPMs should be done only by accredited treatment
    companies/service providers of BPI.

Heat treatment or fumigation of all unprocessed and raw wood packaging
materials are the two approved procedures to be undertaken by
BPI-accredited facilities for compliance with ISPM 15. Fumigation is the
likely treatment to be adopted by the majority of local exporters.

D. Other Wood Industrial/Niche Markets

To achieve its growth targets in 2005, the Arroyo administration
reportedly intends to create a business-friendly environment and will be
implementing priority infrastructure programs. Increased spending on
major infrastructure projects has already resulted in public
construction growing 5.1 percent in the first quarter of this year, a
reversal from the 11.5 percent contraction during the same period in
2004. With the new taxes and other fiscal reforms in place, the GRP is
now trying to attract prospective investors to locate industries in the
Philippines. Central to this bold plan is using the Subic and Clark
industrial zones, two former U.S. military bases. More details ca be
found at:

<http://www.bcda.gov.ph/projects-sct.asp>

Priority GRP infrastructure projects include the construction and/or
upgrading of other major highway and rail construction, ports and
shipping docks. These include: the Northrail and Southrail Commuter
Project; Subic-Clark-Tarlac Expressway Project; Subic Bay Port Project;
South Luzon Expressway Alabang viaduct and Calamba-Sto. Tomas phase;
MacArthur Highway Widening; Southern Tagalog Arterial Road;
Lipa-Batangas connection; Skyway extension; and C-5 extension to Sucat.

Funding limitations remain an obstacle, however, although the GRP
reportedly will pump in about P100 billion (\$1.8 billion) this year for
infrastructure spending. It also intends to tap multilateral funding and
other private sources. Because the projects are to be financed largely
by foreign capital (such as China, for the Northrail and Subic Bay Port
projects), they are expected to utilize foreign technology and
construction materials. A long-term partnership with the GRP vis-à-vis
construction of key heavy infrastructure projects may offer a window for
increased imports of U.S. wood.

On Jan. 16, 2005, President Arroyo issued Executive Order No. 270 (EO
270), which paves the way for revitalization of the mining sector. EO
270 comes after the Philippine Supreme Court ruled in December 2004 that
foreigners were eligible to become majority shareholders in mining
projects. More information on this may be downloaded at:

[http://www.denr.gov.ph](http://www.denr.gov.ph/)

The opening of the mining sector is expected to attract foreign
investors, and in the long term, offer positive opportunities for more
U.S. wood exports.

Statistical Information

  -------------------- ----------------- ---------- ---------- ---------- ---------- ----------
  **PSD Table**                                                                      

  **Country**          **Philippines**                                               

  **Commodity**        Tropical Hardwood                                  1000 CUBIC 
                       Logs                                               METERS     

                       2004              Revised    2005       Estimate   2006       Forecast

                       USDA Official     Post       USDA       Post       USDA       Post
                       \[Old\]           Estimate   Official   Estimate   Official   Estimate
                                         \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]

  **Market Year                          01/2004               01/2005               01/2006
  Begin**                                                                            

  Production           375               500        325        300        0          280

  Imports              275               129        260        80         0          70

  TOTAL SUPPLY         650               629        585        380        0          350

  Exports              0                 0          0          0          0          0

  Domestic Consumption 650               629        585        380        0          350

  TOTAL DISTRIBUTION   650               629        585        380        0          350
  -------------------- ----------------- ---------- ---------- ---------- ---------- ----------

  -------------------- ----------------- ---------- ---------- ---------- ---------- ----------
  **PSD Table**                                                                      

  **Country**          **Philippines**                                               

  **Commodity**        Tropical Hardwood                                  1000 CUBIC 
                       Lumber                                             METERS     

                       2004              Revised    2005       Estimate   2006       Forecast

                       USDA Official     Post       USDA       Post       USDA       Post
                       \[Old\]           Estimate   Official   Estimate   Official   Estimate
                                         \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]

  **Market Year                          01/2004               01/2005               01/2006
  Begin**                                                                            

  Production           170               295        165        170        0          150

  Imports              225               135        250        230        0          240

  TOTAL SUPPLY         395               430        415        400        0          390

  Exports              90                68         100        25         0          30

  Domestic Consumption 305               362        315        375        0          360

  TOTAL DISTRIBUTION   395               430        415        400        0          390
  -------------------- ----------------- ---------- ---------- ---------- ---------- ----------

  -------------------- ----------------- ---------- ---------- ---------- ---------- ----------
  **PSD Table**                                                                      

  **Country**          **Philippines**                                               

  **Commodity**        Hardwood Veneer                                    1000 CUBIC 
                                                                          METERS     

                       2004              Revised    2005       Estimate   2006       Forecast

                       USDA Official     Post       USDA       Post       USDA       Post
                       \[Old\]           Estimate   Official   Estimate   Official   Estimate
                                         \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]

  **Market Year                          01/2004               01/2005               01/2006
  Begin**                                                                            

  Production           250               250        280        200        0          190

  Imports              75                40         80         70         0          70

  TOTAL SUPPLY         325               290        360        270        0          260

  Exports              3                 3          3          2          0          1

  Domestic Consumption 322               287        357        268        0          259

  TOTAL DISTRIBUTION   325               290        360        270        0          260
  -------------------- ----------------- ---------- ---------- ---------- ---------- ----------

  -------------------- ----------------- ---------- ---------- ---------- ---------- ----------
  **PSD Table**                                                                      

  **Country**          **Philippines**                                               

  **Commodity**        Hardwood Plywood                                   1000 CUBIC 
                                                                          METERS     

                       2004              Revised    2005       Estimate   2006       Forecast

                       USDA Official     Post       USDA       Post       USDA       Post
                       \[Old\]           Estimate   Official   Estimate   Official   Estimate
                                         \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]

  **Market Year                          01/2004               01/2005               01/2006
  Begin**                                                                            

  Production           275               310        280        270        0          265

  Imports              45                32         55         40         0          45

  TOTAL SUPPLY         320               342        335        310        0          310

  Exports              20                25         20         25         0          20

  Domestic Consumption 300               317        315        285        0          290

  TOTAL DISTRIBUTION   320               342        335        310        0          310
  -------------------- ----------------- ---------- ---------- ---------- ---------- ----------