12TH DEVELOPMENT POLICY RESEARCH MONTHADDRESSING THE JOBS CHALLENGE TOWARD INCLUSIVE GROWTH

The Philippine Manufacturing Industry Roadmap

Agenda for New Industrial Policy, High Productivity Jobs and Inclusive Growth

Rafaelita M. Aldaba

28 August 2014

PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES

NEDA SA MAKATI BUILDING

Structural Transformation & industry upgradinginclusive growth

800K new entrants/year 3M unemployed ; 7.3M underemployed Services cannot provide all the needed jobs Manufacturing can employ skilled, semi-skilled, unskilled

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Value Added Employment

average growth average share average share

80s 90s 20s 80s 90s 20s 80s 90s 20s

GDP 1.7 3.0 4.7 100 100 100 100 100 100

AGRI 1.1 1.8 3.0 23.9 20.8 18.9 49.6 43.2 36.1

IND 0.3 3.0 4.2 38.0 34.1 33.1 14.5 16.0 15.1

MFG 0.9 2.5 4.1 26.3 24.3 23.7 9.9 10.0 9.1SER 3.3 3.6 5.8 40.4 42.4 48.0 35.9 40.9 48.8

Strategic Industrial Policy

Globalization/regional economic integration AEC 2015 Global/Regional Production Networks

Productivity/competitiveness crucial

New industrial policy Remove obstacles to growthInvestments Efficient use of existing capacity & expansion Deepen participation in regional production networks

New Industrial policy: coordination/facilitation, creation of proper environment for private sector development

Government: not proximate cause of growth, but private sector, investment & entrepreneurship

Create environment to strengthen industries, ensure they are not disadvantaged by international competitors

Roadmap for Structural TransformationVision: globally competitive manufacturing

-Rebuild capacity existing industries, strengthen emerging industries, maintain competitiveness of comparative advantage industries

-Participate as hubs in regional & global production networks for auto, electronics, machinery, garments, food

-Shift to high value added activities,investments in upstream industries -Link & integrate industries-SMEs & large enterprises

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Phase I 2014-2017

Phase II 2018-2021

Phase III 2022-2025

Strategic Actions, Complementary Measures

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30% value added; 15%

employment

Horizontal measures

Coordination mechanism

Vertical measures

• Close supply chain gaps• Expand domestic market

& exports• HRD & skills• SME development• Technology upgrading,

innovation

• Investment promotion

• Power, smuggling, logistics & infrastructure

• Competitive exchange rate

open trade regime, sustainable macro policies, sound tax policies & administration,efficient bureaucracy, secure property rights, institutions that promote adaptiveresearch & patent regime, access to finance & technology for SMEs

Strategic Actions: Manufacturing

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STRATEGIC ACTIONS

Close Supply/Value Chain Gaps

Copper Institutional mechanism to fully integrate the industry

Furniture Supply hubs for raw & natural materials

Tool & die Access to raw materials, equipment, & software

Paper Fiber raw material base, develop massive tree plantations, commercial agro forestry with virgin wood pulp production

Iron & steel

Full integration of industry upstream-mining, reliable supply of iron ore & coal

Expand domestic market, exportsAuto: heart of the manufacturing roadmap

• Complex product, 30,000+ parts & components, different production processes: large multiplier effect

• Auto investments: foundation for broad-based industrial growth• Integration into global production networks

Basic Industries

Parts & Components Manufacturing

Vehicle Manufacturing

Auto Supporting Industries

3rd Tier Supplier

(Raw

Materials)

2nd & 1st Tier Supplier(Intermediate & semi-

finished)

Mining

Iron & Steel

Petrochemicals

Textile

Machinery & Equipment, Dies & Moulds, Metal Stamping, Die Casting,

Machining

Rubber

Chemicals

Vertical ConstraintsMain Issues & Constraints DTI-BOI actions

• Absence of raw materials (upstream); weak parts & components sector (mid-stream); downstream

• Roadmaps, TWGs as venue for discussions & policy interventions

• Lack of economies of scale, build on domestic supply base

• Auto Program

• Access to finance, technology upgrade, inability to comply with product standard regulations

• Credit Bureau, BSP Credit Surety Fund

• DTI-SMED Council

• Lack of skilled workers, training • DOLE, TESDA, CHED

• Industry-academe linkages new product development, R&D

• DTI Research Consortium, government-academe-industry partnership

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Type Sectors

Design, tool making, prototyping, molding, die casting

Auto parts, Tool & Die

Chemical engineering, Materials Engineering

Chemical, Rubber, Plastics

Supervisory, managerial, productivity Furniture

Foundry technology, Metallurgical, Mechanical, Industrial, Metal casting Engineering

Metal casting

Die design, Tool & Die Engineering Tool & Die

Vocational trainings (TESDA) Iron & steel, Furniture

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HRD & Skills Trainings

COOPERATION WITH TESDA, CHED IS CRUCIALDOLE: labor policies to facilitate movement from low

productivity to high productivity jobs

Horizontal Constraints Main Issues & Constraints Actions

• High cost & unpredictability of power• High cost of domestic shipping

• IPP preferred list, DOE coordination

• MARINA, PPA

• Smuggling, corruption, bureaucracy• Lack of streamlining/automation of

interrelated business procedures• Lack of policy consistency,

transparency, & predictability• Permits issued by LGUs, national

agencies • Lack of competition law• 60-40% foreign equity rule

• BPLS, NCC• Industry Technical

Working Groups

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Roadmap Status

• Industry Development Council: draft EO submitted to OP

• Manufacturing Resurgence Program

• Regional Roadmaps

• Research Consortium

• Comprehensive National Industrial Strategy

Status Industries

Completed Aerospace, auto, biodiesel, ceramic tiles, chemicals, copper, e-vehicles, electronics, furniture, iron & steel, petrochem, plastics, tool & die, rubber, pulp & paper, motorcycle, natural health products, metalcasting, shipbuilding

On-going Processed fish, meat, chocolates, condiments, carageenan, processed shrimp, mangoes, IC design

Industry Roadmaps: moving up the value chain, productivity

Government as coordinator & facilitator productivity, skilled workers, technology, regulations, infra

We cannot leapfrog industrialization, we need to upgrade & transform our industries not only for inclusive growth but in

preparation for AEC 2015.

For comments/suggestions, email me at

fita.aldaba@gmail.comTHANK YOU!