Competitive and Innovative Industries

in a Low Carbon Economy

Rafaelita M. Aldaba

Department of Trade and Industry- Board of Investments

Regional Business and Climate Summit 2017

Business Opportunities and Climate Change

21 August 2017, Cebu City

Securing the Future of Industries

PH strong growth driven by manufacturing & services

• Amid economic & global uncertainty, PH has grown by 6.3% in the last 7 years (‘10 to ‘16)

• 2016: China 6.7%, Vietnam 6.2% , Philippines 6.8%• Manufacturing resurgence: 7.5% (‘10 to ‘16); 7% in 2016• 2017 Forecasts: WB 6.9%, IMF 6.8%, ADB 6.4% • PH impressive growth: a new growth area, Asia’s new economic

tiger

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

Quarterly Growth 2009-2017

AGRI., HUNTING, FORESTRY AND FISHING MANUFACTURING

SERVICE SECTOR GROSS DOMESTIC PRODUCT

Manufacturing Structure

• Dominated by food manufacturing; radio, TV, & communication equipment; chemical & chemical products; furniture; & beverage

• Food manufactures and radio, TV & communication equipment & apparatus driving manufacturing growth

% Share Growth (%) % Share Growth (%)

Industry Sector 2015 2016 2015 2016 Industry Sector 2015 2016 2015 2016

Food 34.3 34.7 1.6 8.5 Rubber & plastic 1.4 1.7 3.4 24.4

Beverage 4.1 4.2 -1.0 10.5 Non-metallic mineral 2.4 2.3 9.4 -2.2

Tobacco 0.3 0.3 27.2 10.4 Basic metal 2.0 2.6 6.2 39.1

Textile 1.8 1.6 6.4 -8.2 Fabricated metal 1.2 1.2 8.2 0.1

Wearing apparel 1.8 1.7 -2.3 0.1 Machinery ex electrical 1.8 2.1 18.3 25.5

Footwear, leather 0.4 0.4 4.8 5.4 Office, accounting, computing

1.2 1.6 -13.9 44.0

Wood, bamboo 1.0 1.1 28.0 17.0 Electrical machinery 2.1 2.2 8.4 12.3

Paper 0.9 0.9 14.5 6.0 Radio, tv, comm’nequipment

17.7 16.2 12.5 -1.7

Publishing, printing 1.0 1.0 17.0 3.7 Transport equipment 1.8 2.1 8.4 25.0

Petroleum 2.8 2.6 -1.3 0.0 Furniture & fixtures 5.1 4.7 -4.6 -1.0

Chemical 12.5 12.8 15.5 8.8 Miscellaneous 2.3 2.1 -0.3 -1.1

Services Performance

Source: National Income Accounts, Current Labor Statistics. Philippine Statistics Authority

*Growth rates and value added share at constant 2000 prices

MAJOR SECTOR

Share to Total GVA (%) Growth Rate (%)

2013 2014 2015 2016 2013 2014 2015 2016

Agriculture, Forestry and Fishing 10.5 10.0 9.5 8.8 1.1 1.7 0.1 -1.3

Industry 32.9 33.3 33.4 33.8 9.2 7.8 6.0 8.0

Services 56.7 56.6 57.1 57.5 6.8 6.2 6.8 7.5

Construction 5.7 5.7 5.9 6.2 9.6 7.2 9.4 12.6

Electricity, Gas and Water Supply 3.3 3.3 3.2 3.3 4.7 3.6 5.5 9.6

Transport, Communication and Storage 7.5 7.5 7.7 7.6 4.8 6.5 8.0 5.9

Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods

16.6 16.5 16.7 16.8 6.2 5.8 7.1 7.3

Financial Intermediation 7.1 7.2 7.2 7.3 12.6 7.2 6.1 7.7

Real Estate, Renting & Business Activity 10.9 11.2 11.3 11.6 8.9 8.7 7.2 9.1

Public Administration & Defense, Compulsory Social Security

4.2 4.1 3.9 3.9 2.7 4.0 1.2 6.9

Other Services 10.3 10.1 10.3 10.4 4.9 4.0 7.9 7.5

Agriculture, Forestry, & Fishing Performance

Source: National Income Accounts, Philippine Statistics Authority

• Food manufacturing performance has not been matched by the AFF sector• Growth in agriculture has remained low (negative in 2016); declining share to GDP • Except palay, livestock, poultry, fishing; marginal contribution of other crops despite large

potentials for high value crops (rubber, cacao, coffee, coconut, mangoes, etc)

MAJOR SECTORShare to Total GVA (%) Growth Rate (%)

2013 2014 2015 2016 2013 2014 2015 2016

Agriculture, Forestry and Fishing 10.5 10.0 9.5 8.8 1.1 1.7 0.1 -1.3Agriculture, Hunting, and Forestry 8.5 8.2 7.8 7.2 1.2 2.1 0.6 -0.7

a. Agriculture 8.5 8.1 7.7 7.2 1.0 2.1 0.8 -0.6

Palay 2.1 2.1 1.9 1.7 2.2 2.8 -4.3 -2.9

Corn 0.6 0.6 0.5 0.5 -0.4 5.1 -3.3 -4.0

Coconut including copra 0.4 0.4 0.4 0.3 -2.8 -4.6 0.1 -6.1

Sugarcane 0.2 0.2 0.2 0.2 -6.9 1.7 -7.4 -0.7

Banana 0.5 0.5 0.4 0.4 -6.3 2.7 2.3 -2.0

Mango 0.2 0.2 0.2 0.2 6.2 8.1 4.5 -10.1

Pineapple 0.2 0.2 0.2 0.2 2.8 2.2 2.7 1.2

Coffee 0.0 0.0 0.0 0.0 -11.7 -4.2 -5.3 -4.9

Cassava 0.1 0.1 0.1 0.1 6.3 7.6 6.9 1.6

Rubber 0.0 0.0 0.0 0.0 0.4 1.9 -11.3 -8.6

Other crops 0.6 0.6 0.6 0.5 0.2 0.7 0.8 -2.9

Livestock 1.4 1.3 1.3 1.3 1.8 1.0 3.8 4.6

Poultry 1.2 1.1 1.1 1.0 4.2 0.4 5.7 1.3

Agricultural activities and services 0.7 0.7 0.7 0.7 0.6 4.5 6.2 3.8

b. Forestry 0.1 0.1 0.1 0.0 39.8 2.6 -26.7 -14.7

Fishing 1.9 1.8 1.7 1.5 0.7 -0.2 -1.8 -4.0

ARMMMIMAROPA

SOCCSKSARGEN

CAGAYAN VALLEY

CAR

EASTERN VISAYAS

CARAGA

CENTRAL VISAYAS

ILOCOS

CENTRAL LUZON

NORTHERN MINDANAO

CALABARZON

NCR

ZAMBOANGA PENINSULA

DAVAO REGION WESTERN VISAYAS

BICOL

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

-1.00% 1.00% 3.00% 5.00% 7.00% 9.00%

GR

DP

as

% o

f G

DP

(2

01

5, a

t co

nst

ant

pri

ces)

GRDP growth rate (2014-2015, at constant prices)

Regional AnalysisGross Regional Domestic Product

• Geographically, contribution to GDP is highly concentrated in a few regions

• NCR, CALABARZON, & Central Luzon account for 63 % of GDP• Poverty-stricken regions in Mindanao have the lowest contribution

(ARMM 0.66%, CARAGA 1.3%)

Agriculture

NCR

CAR

ILOCOS

CAGAYAN VALLEY

CENTRAL LUZON CALABARZON

MIMAROPA

BICOL

WESTERN VISAYAS

CENTRAL VISAYAS

EASTERN VISAYAS ZAMBOANGA PENINSULA

NORTHERN MINDANAO

DAVAO REGION

SOCCSKSARGEN

CARAGA

ARMM

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

-10.00% -8.00% -6.00% -4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00%

Agr

icu

ltu

re a

s %

of

GR

DP

(2

01

5, a

t co

nst

ant

pri

ces)

Agriculture growth rate (2014-2015, at constant prices)

• Except for NCR, our regional economies are still dependent on agriculture, forestry, and fishery

• In terms of size, the largest contributors are led by Central Luzon (16.3%) followed by Northern Mindanao( 9.6%,) CALABARZON (9.3%), Western Visayas (8.2%), & Cagayan Valley (7.9%)

Manufacturing

• Manufacturing activities have been largely confined in CALABARZON (40%) followed by NCR (20%) and Central Luzon (14%)

• Central Visayas (7%) and Davao (4%) trying to catch-up

NCR

CAR

ILOCOS

CAGAYAN VALLEY

CENTRAL LUZON

CALABARZON

MIMAROPA BICOL

WESTERN VISAYAS

CENTRAL VISAYAS

EASTERN VISAYAS

ZAMBOANGA PENINSULA

NORTHERN MINDANAODAVAO REGION SOCCSKSARGEN

CARAGAARMM

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

-4.00% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00%

Man

ufa

ctu

rin

g as

% o

f G

RD

P (

20

15

, at

con

stan

t p

rice

s)

Manufacturing growth rate (2014-2015, at constant prices)

Services

• Huge imbalance among the regions in terms of services; services is highly concentrated in highly urbanized NCR accounting for 52% of total

• Outside NCR, services is quite high only in relatively large economic areas led by CALABARZON (9.8%) followed by Central Luzon (6.5%), & Central Visayas (6.4%)

NCR

CAR

ILOCOS

CAGAYAN VALLEY

CENTRAL LUZON CALABARZON

MIMAROPA

BICOLWESTERN VISAYAS

CENTRAL VISAYAS

EASTERN VISAYASZAMBOANGA PENINSULA NORTHERN MINDANAO

DAVAO REGION

SOCCSKSARGEN

CARAGA

ARMM

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00%

Serv

ice

s a

s %

of

GR

DP

(2

01

5, a

t co

nst

ant

pri

ces)

Services growth rate (2014-2015, at constant prices)

RegionPoverty Incidence

(2015)Unemployment

(2015)

PHILIPPINES 21.6 6.3

NCR 3.9 8.5CAR 19.7 4.9

I - Ilocos Region 13.1 8.4

II - Cagayan Valley 15.8 3.2III - Central Luzon 11.2 7.8IVA - CALABARZON 9.1 8.0IVB - MIMAROPA 24.4 3.3V - Bicol Region 36.0 5.6VI – W.Visayas 22.4 5.4VII – C. Visayas 27.6 5.9VIII – E.Visayas 38.7 5.4

IX – Zamboanga 33.9 3.5

X – N. Mindanao 36.6 5.6

XI - Davao Region 22.0 5.8

XII - SOCCSKSARGEN 37.3 3.5

CARAGA 39.1 5.7ARMM 53.7 3.5

Poverty incidence & Unemployment

• Poverty incidence remains high in ARMM, CARAGA, Eastern Visayas, Soccsksargen, Northern Mindanao, Bicol, & Zamboanga

• Unemployment rates are highest in NCR, IlocosRegion, Central Luzon, & CALABARZON

Where do we want to go and How do we get there?Integrate industries via the Comprehensive National Industrial Strategy

• Overall Goal: create globally competitive & innovative industrieso Growth oriented action to upgrade

industries, move up the value chaino Remove obstacles to growth attract

more investmentso Deepen participation in regional

production networks/global value chains (GVCs)

• Role of Government: Enabler & facilitator to address coordination failureso Address the most binding constraints

preventing industries from growingo Create proper environment for private

sector development

Inclusive sustainable

growth

Free Trade Agree-ments

Jobs, Competitiv

eness

• GVC-focused • Fosters innovation &

entrepreneurship• Cluster-based

industrial strategy

‹

COMPREHENSIVE NATIONAL INDUSTRIAL STRATEGY

TOP FIVE PRIORITIES

Opportunities• New high

level growth

trajectory

• Growing

middle class

• Political

stability

• Young,

English

speaking

workforce

• Rising

business

confidence

• AEC & FTAs

Challenges

• Complex

regulations

• High cost

of power

• Lack of

ports,

airports,

roads

• SMEs’

access to

finance

• Supply

chain gaps

Manufacturing

Tourism

IT BPM

KPO

From voice to

non-voice

Agribusiness

• High value

crops

Infrastructure

& Logistics

NEW JOBSHIGHER GDP

• N E W I N D U S T R I A L P O L I C Y

• B O L D E R T R A D E P O L I C Y

• I N T E N S E I N V E S T M E N T

P R O M O T I O N

• S K I L L S T R A I N I N G & H U M A N

R E S O U R C E D E V E L O P M E N T

• I N N O VAT I O N & R & D

• G R E E N G R O W T H

• M O D E R N S M E P O L I C Y

Strategies to make manufacturing an engine of growth & source of more & better Jobs

30% value added; 15% employment

Horizontal measures

Coordination mechanism

Vertical measures

• Close supply chain gaps

• Expand domestic market & exports

• HRD & skills• SME development• Innovation• Green growth

• Promotion• Power, smuggling,

logistics, infrastructure

• Improve regulation, reduce cost of doing business

• Competitive exchange rate

open trade regime, sustainable macro policies, sound tax policies & administration,efficient bureaucracy, secure property rights, institutions 13

Priority Industries• Electronic manufacturing services : auto electronics, medical devices,

telecommunications equipment, power storage, civil aviation/aerospace); Semiconductor manufacturing service: IC design

• Automotive & auto parts: CARS, Eco PUV Program – alternative energy vehicles

• Aerospace parts & Aircraft Maintenance, Repair, & Overhaul• Chemicals: petrochemicals, acyclic alcohols & derivatives, metallic salts &

peroxy salts of inorganic acids, cyclic hydrocarbons, oleochemicals• Shipbuilding & Ship-repair: RORO as well as small- and medium-sized vessels• Furniture, garments, GDH manufacturing & design• Tool & die manufacturing and design• Agri-business: Food & resource-based processing (cacao, coffee, mangoes,

bananas, coconut, rubber, bamboo, fruits & nuts, & other high value crops)• Construction: roads, railways, bridges, ports, airports, & low-cost housing • IT-BPM: more complex non-voice services BPO, KPO in medical, financial, &

legal services; game development; engineering services outsourcing, software development, shared services

• Transport and Logistics: land, air, water, warehousing, support facilities• Tourism, Creative Industries, and E-Commerce

MANUFACTURING FOR STRUCTURAL CHANGE

-automotive, aerospace parts electronics, garments, food & resource-based industries, chemicals, furniture, tool & die, shipbuilding

-move to high tech transport equipment, chemicals, electrical machinery-manufacturing hubs in regional & global production networks for auto, electronics, machinery, garments, food

-high value added activities upstream industries (chemicals, iron & steel), med-tech basic & fabricated metal

Phase I 2014-2017

Phase II 2018-2021

Phase III 2022-2025

VISION: globally competitive & strongly linked with other

sectors, a main growth driver

AGRIBUSINESS: CATALYST TO DRIVE

REGIONAL ECONOMIC TRANSFORMATIONTransform & upgrade agriculture from traditional farming to a

globally competitive agribusiness sector

-rubber, coconut, mangoes, coffee, cacao, banana, palm oil & other high value crops; supply chain gaps: strengthen agro-processing & its linkages to production

-deepen participation in GVC -PH as agribusiness regional hub

- strengthen supply chains, upgrade commodity clusters; R&D, access to technologies, finance; regulatory & certification system

Phase I 2014-2017

Phase II 2018-2021

Phase III 2022-2025

SERVICES: GLUE THAT BINDS ALL

SECTORS TOGETHER

-labor-intensive sectors: tourism, construction, ship repair, MRO-infrastructure investments -move up ITBPM GVC

- PH as regional services hub: training - upgrade services especially manufacturing related services to sustain growth & job creation

-education, design, R&D, finance, infrastructure-engineering & services embedded in manufacturing-HRD & skills training, innovation ecosystem

Phase I 2014-2017

Phase II 2018-2021

Phase III 2022-2025

Globally competitive services, create quality jobs, move up

the value chain

New Industrial Policy &

transition to a low carbon economy • Along with skills, materials, capital and digital technology;

manufacturing requires reliable supply of energy at affordable prices – Wafer fabrication, textile, iron & steel not pursued due to high power

costs

– High power costs being cited as major factor affecting competitiveness

• Gradual shift to green manufacturingo Improvements in the energy efficiency of manufacturing

o Replacement of fossil fuels with renewable energy sources

• Green processes, practices, & productso Energy-efficient technologies

o Green goods & services

o Clean energy technologies: resource recovery and reuse, renewable feedstocks, electricity storage, fuel cells, renewable energy (solar, wind, geothermal, bioenergy, hydro), nuclear fission and fusion, advanced vehicles

• Enabling environment for the adoption of energy efficiency measures: laws, regulations, incentives, finance, education &training

Greening the Industry Roadmaps

• Integrated green policies in 6 industry roadmaps ( through

GIZ support)

Industry Green Measures: Energy Efficiency

Auto Resource efficiency strategy – reduce energy consumption

Pulp & Paper

25% of production costs are energy-related, industry needs to invest in new plants & to retrofit existing plants

Plastic With rising energy costs, the industry’s major focus is on process optimization & technological innovation to reduce production costs & reduce emissions; emphasis on the implementation of sustainable technologies for energy generation, storage & recovery

Housing Green housing schemes

Furniture Optimized process management & new technologies to reduce cost

Copper Green Manufacturing Zone in Leyte: resource efficiency in energy, materials, water, & transportation, cleaner production, use of RE

Sustainable energy for industry development

Climate Incentives for Manufacturing

• Focus on energy efficiency in manufacturing: cement, iron & steel, pulp & paper, chemicals

• CLIMA: fiscal incentives that are targeted, time bound, & performance-based

• BOI Incentives: Income tax holiday & duty free importation of capital equipment depending on magnitude of energy saving from project

• Help achieve PH NDC commitment

Eco-PUV Modernization ProgramObjective: produce safe, energy-efficient, eco-friendly PUVs to support the government’s PUV Modernization Program• DOTr & DTI: developing developing manufacturing program• Total PUVs for replacement: 200K• Reliable, sustainable supply of domestically-manufactured

PUVs with after-sales support & service• Participants: platform manufacturer or body builder• Mandatory local production: chassis, after-sales network,

common facilities• Prop. Shaft, rear axle, wheels, tires, batteries, radiator, wire

harness, fuel line, brake line, fuel tank, rubber hose, meter cluster, head/tail lights, horn, leaf & spring coild, shock absorbers, interior trims, body shell, seats, cabin lights, seatbelts, transmission

• Support package: 50% of capex, access to LTFRB franchise, government finance

E-Vehicle IndustryE-jeepney, E-quad, E-trike, E-bus/trucks, E-car

• 28 firms

• 11 parts & components

• Employment: 14,480

• 38,220 unit in 2013 to 69,145 units in 2017

Government Policies & Programs• PH government has been promoting the use of E-

vehicles across the country• Executive Order 488

– sustainable development & comprehensive industrial policy for the motor vehicle industry

– zero tariffs for E-vehicle components, parts & accessories for assembly of hybrid, electric, flexible fuel & CNG motor vehicles

• Board of Investments Investment Priorities Plan: listed as preferred activity– Establishment of charging stations: income tax holiday

• Department of Energy: E-trike project deploy 100K e-trikes nationwide to replace traditional gasoline-fed tricycles

The E-Vehicle Industry Roadmap:Strategic Action Plans

Support Electric & Hybrid Vehicle Bill (E & Hybrid Vehicles, Charging Stations Promotions Act 2016)

Form inter-agency task force for the promotion Electric & Hybrid Vehicles and the installation of Battery Charging and Swapping Stations nationwide

Encourage participation of foreign EV players in the development of the EV industry

Formulate standards for EV parts & components, vehicles & testing

Build more battery charging & swapping stations

Pursue research & development initiatives and application of newer EV technologies

Engage Automotive Original Equipment Manufacturers/Assemblers to participate in the EV market

Encourage private banks to offer cheaper and easier access to green financing

WITH GOVERNMENT ASSISTANCE WITH PRIVATE SECTOR INVOLVEMENT

• create globally competitive & innovative E-vehicle industry• conduct feasibility study on E-bus, E-jeepney

Thank you!

The new industrial policy can make our industries

competitive, facilitate transition to a low-carbon

economy, and create an environment conducive

to private sector development leading to

sustainable & inclusive growth.

For more information, visit our website at

industry.gov.ph