Japan’s Inputs towards the Formulation of

Industry Vision of the Philippines

Industrial Development Scenario for “No One

Left Poor”

29 November, 2017

Kunihiko ShinodaDeputy Director-General

Ministry of Economy, Trade and Industry, Japan

1

“Philippine ambition: No more poor Filipinos by 2040,” “Philippine

Development, Plan (PDP) 2017–2022,” mentions "To become a middle-

income country with poverty alleviated completely" as a goal until 2040.

“Philippine ambition” has started promoting reform for enhancing the

social structure and correcting unfair inequality as well as enhancement

of economic growth potential in order to achieve the goals such as:

establishing a clean and “Filipino first” government;

realizing a society where even socially-handicapped and alienated people can

actually feel the economic growth,

and ensuring economic safety and stability by increasing the national welfare.

Background

2

Global competition is becoming severer, especially after the full enforcement of AFTA in 2018.

There are export pressures from China and India, while ASEAN member states

have to identify their comparative advantages.

Make in India=

Promotion of manufacturing

and export

Influx of over

produced goods

Full enforcement of AFTA in 2018

Competition among Asian countries

3

One of the advantages of the Philippines is a growing domestic market andpopulation.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Indonesia Malaysia The PhilippinesThailand Viet Nam

Indonesia

Viet Nam

The Philippines

Malaysia

Thailand

Source: IMF World Economic Outlook Source: UN Population Division、2015 estimation

GDP growth rates and estimates for

major ASEAN countries Population dividend for major Asian countries

4

The Philippines is ranked number 8 of potential business destination of Japanese manufacturing companies.

Source: JBIC questionnaire survey data

77%

32%

23%

21%

19%

0% 20% 40% 60% 80%100%

Growth potential of the

local market

Inexpensive labor

The size of the market as

of today

Supply base to assemblers

Export base to other

countries

Source: JBIC questionnaire survey data

Ranking of prospective investment destination

by Japanese manufacturing companies

Reasons of prospectivity of the Philippines as

investment destination

5

the Philippines has faced some challenging issues for creating the above-

mentioned employment.

Survival among countries due to ASEAN economic integration

Insufficient domestic industry accumulation, outflow of highly skilled HR

Oligopoly of industry, unfair business circumstances, governmental capacity

This vision indicates a scenario of creating stable employment for “No

One Left Poor” and the policy direction, and introduces successful cases

in other countries, including Japan.

Role of Industrial Development Vision

6

Scenario for Realization：Pillar1Pillar1 Creation of Large-scale Employment - Establishment of Domestic

Industrial Base -

<Step 1> Introduction

• Necessity of competitiveness in both quality and cost for domestic production

increase

• Lack of capital, technology, human resources, know-how

• Introduction of foreign capital / technology → Necessity of activating domestic

demand

<Step 2> Spillover to local industry

• Invitation of foreign SMEs, supporting industries → Spill over of technology and

management know-how to local companies → competitive local SMEs

<Step 3> Participation in global value chain

• Improvement of industrial infrastructure and creation of large-scale employment

→ Strengthening industrial competitiveness. Forming foundation of export

industry

7

Direction of Policy & Proposal for Pillar1

Identification of Industry Groups to

be Focused on and Strategy

Formulation

Expansion of Support for Local

Supporting SMEs

Ensuring Fair Competition

Developing Supporting Industries

and Industries for Domestic Demand

through Attracting Foreign Capital

Development of Infrastructure and Cross-Agency

Industrial Development System

Introducin

g foreign

capital for

domestic

demand

Formulation of industrialization strategy by

public-private partnership

Creating Domestic PEZA

Political leadership remediation campaign

Attracting foreign Supporting Industries

Industry-Oriented Human Resource Development

Developing supporting industry by

benchmarking CARS program

Expanding financing for SMEs

Interagency coordination

through IDC

Consolidation / transition support of existing

industries

Deregulation of foreign investment in retail

Expanding retail financing

Expansion of vocational training schools

Introduction of Framework for

Promoting Domestic Trade

Further Activation of Domestic

Demand

Direction of Policy Proposal

8

Importance of supporting industry and attraction of foreign investments by

companies with technology and cutting-edge processing equipment.

For Example…

44

618

228

0

100

200

300

400

500

600

700

The Philippines Thailand Indonesia

Number of member companies of auto-parts industry associations

Source: NRI based on hearing

from each association

Support for local business development in human resource development and

capital investment.

Incentive scheme and improvement of ease of doing business for promoting

investments aiming the domestic market.

9

Scenario for Realization：Pillar2

Pillar2 Creation of High Value-Added Employment -Retaining Highly Skilled

Industrial Workers within the Philippines-

• Leak out of human resources with advanced knowledge, skills, ability to

overseas

• Creating high value-added / advanced industrial groups to secure HR, in

addition to utilizing HR in foreign companies

＜possible perspective＞• Utilization of industries already having strengths (IT industry etc.) → High value

added by expanding business (design, etc.) and cooperating with other

industries

• Creation of new industries → Promotion of entrepreneurship such as start-up,

Promotion of cross-sectoral integration projects, innovation, university

incubation base, etc.

10

Direction of Policy & Proposal for Pillar2

Business Expansion of

Existing Industry and

Cooperation with Other

Industries

Integration of IT and electronics

industry by Embedded IT

Promotion of collaborating project

Promoting start-up companies

Promoting FinTech

Creation of high

added

value/advanced

industrial group

Creating New Industries

and Promotion of

Entrepreneurship for

Innovation

Promotion of Projects for

Creation of New

Industries and Innovation

Making university incubation base

Formation of industry, government

and academe consortium

Attracting highly skilled industrial

human resources to return to the

country

Direction of Policy Proposal

11

Full utilization of Filipino who are capable of English and IT.

ASEAN regional engineer hub

ASEAN regional ESO hub

Promotion of innovation to increase start-ups and enhance hybrid sectors of IT

and other sub-sectors.

For Example…

Start-ups at ASEAN-JAPAN Fair in Manila Ministers at ASEAN-JAPAN Fair

12

Scenario for Realization：Pillar3

Pillar3 Creation of Employment through Local Industry Development –

Agriculture, IT/BPO industry, etc.-

• Focusing on specific industries by taking advantage of the characteristics of

rural areas (Central Luzon, Calabarzon, Mindanao),

→ Providing incentives to enterprises in rural areas

＜Potential Target area＞• Promoting agriculture, forestry and fishery industries using attractive products

/ upgrading logistics system

• Promoting IT / BPO industry that can overcome geographical division

• Ripple effect for tourism and retail

13

Direction of Policy & Proposal for Pillar3

Increasing Added Value

by Clustering and

Modernizing of Agriculture

Development of IT-BPO industry

Incentives for Company Location in

Regional Areas

Supporting Local Governments to Make

Industrial Policies

Improving fishing ports / seaports

Presentation of regional incentives

Upgrading Logistics

Enabling Freshness

Maintenance

Support for expanding business into food

processing industry

Formulation of support for local

governments

Improving cold chain

Regional brand certification system

Attract IT-BPO industry to provincial areas

Promotion of

agriculture

Creating derivative effects on tourism / retail

Direction of Policy Proposal

14

Food value chain: Value chain linkage is weak between mega consumer market

such as Manila NCR and other agricultural areas.

Bridging agriculture and food processing sectors and establishing distribution channel

and cold chain network.

Vitalization of service industry including retails that will be stimulated by the

development of above mentioned sectors and tourism.

IT/BPM can conquer the geographical disruption, create a large employment and

utilize the English ability of the Filipino.

For Example…

15

For Example…

Bacolod

Manila

Cagayan De Oro

Cebu

Davao

Dumaguete

Iloilo

Laoag

Legazpi

Naga

Puerto Princesa

Roxas

Tuguegarao

Zamboanga

Source: NRI, based on National ICT Confederation of the Philippines

Clark

BaguioDagupan

Dasmarinas

Lipa

MalolosSta Rosa

Taytay

Balanga Iriga

Tarlac

Centres of Excellence

Top Ten Next Wave Cities

Emerging Cities

IT/BPM is widely spread throughout the

country. Four out of six centers of excellence

are located in Mindanao and Visayas.

Next Wave Cities of IT/BPM

16

Thrusts of infrastructure development.

Policy coordination among governmental agencies towards effective

implementation.

For Example…

17

Japan will cooperate for Philippines industrial development and Philippines

industrial policy

For example･･･

For the foundation of Large-scale Employment, assisting for promoting local

supporting industries, and assisting Industry human resource development

For creation of High Value-Added industry, cooperating for start-ups and

funding pilot project for innovative business

Provision of information for policy making and support for capacity building

utilizing various dialogues.

Japan will cooperate for realization of Philippines industrial vision