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The Future of Philippine Industries
PH COMPREHENSIVE
NATIONAL INDUSTRIAL
STRATEGY
Rafaelita M. Aldaba
Industry Development Group
30 June 2015
The Future of Philippine Industries
Outline of PresentationObjective: PH Comprehensive National Industrial Strategy (CNIS)
1. PH New Industrial Policy
2. CNIS
o Manufacturing
o Agriculture
o Services
3. Implementation Mechanism
o Industry Development Council
o Industry Technical Working Groups
o Manufacturing Resurgence Program
The Future of Philippine Industries
Part 1: Motivations -- Why do we need a
new industrial policy?
• Inclusive growth, creation of more & better jobs
o Jobless growth: unemployment 7.5% (’06-’10); 6.4%
(A ‘15); underemployment 18-20% (late 20s); 17.8%
(A’15)
o Stagnant manufacturing & failure to create jobso Manufacturing share: 26.3% (‘80s), 23.7% (‘20s)
o Employment contribution: 9.9% (‘80s), 9.1% (‘20s)
o Persistently high inequalityo Poverty incidence has declined but inequality hardly
changed even worsened in 1997 and 2000
o Poverty incidence: 24.6 (‘13) to 25.8(‘14)
• Globalization, rising regional economic integration,
global value chains (GVCs)
o Competitiveness is crucial
Global Value ChainsV
alu
e A
dd
ed
Design
Purchasing
Production
Distribution
Marketing
Services
Pre Production Production Post Production
• Most goods are made in the world & countries compete on
economic roles within the value chain
• GVCs – opportunities for upgrading & diversification
• Strategy on how to position our industries
R&D
The Future of Philippine Industries
GVC: IPhone & T-shirt
T-shirts: cotton (US) exported
to China to be manufactured,
returns to US for imprinting &
wholesaling & retail
Trend: dispersion of
functions
Source: Kraemer et al 2011
• Applications processor: Korea
• Memory flash: Korea
• Connectivity: US
• Power management: Germany
• Interface & sensors: US, Japan,
France
• Radio frequency: Germany, US
• Display/camera: Korea or Japan,
US, Taiwan
• Battery: Korea
Distribution of value for Iphone
GVCs require high quality services embodied in production & increasingly outsourced
US (Apple) captures 58.5% of Iphone sales price
Korea: 5%
Japan: 0.5%; China: 1.8%
Most value: product design, software development, product management, marketing & other high wage functions kept by Apple
Trend: dispersion of functions
Source: Kraemer et al 2011
Apple profits30%
Distribution & retail15%
Non-Apple US
profits2%
Taiwan profits2%
Japan profits1%
S. Korea profits7%
Unidentified profits
5%
Cost of inputs materials
31%
Cost of inputs China labor
2%
Cost of inputs non-China labor
5%
Distribution of Value for Ipad
For Ipad, US: 30% & 15% distribution &
retail
Korea: 7%, Taiwan: 2%, China: 2%
Source: Kraemer et al 2011
Apple profits58%
Non-Apple US profits
2%
EU profits
1%Taiwan profits
1%
Japan profits1%
S. Korea profits
5%
Unidentified profits
5%
Cost of inputs materials
22%
Cost of inputs China labor
2%
Cost of inputs non-China
labor3%
The Future of Philippine Industries
Part 2: Comprehensive National
Industry Strategy (CNIS) FRAMEWORK
THREE IMPORTANT CHANNELS AFFECTING INDUSTRY GROWTH: COMPETITION, INNOVATION, PRODUCTIVITY
MANUFACTURING SERVICES
AGRICULTURE
FISHING,
FORESTRY
MINING
INTERNAL FACTORS: GOVERNMENT POLICIES &PROGRAMS,
INSTITUTIONS, INFRASTRUCTURE, MACRO STABILITY, RULE OF LAW,
PEACE & ORDER, POLITICAL CLIMATE
EXTERNAL FACTORS: GLOBALIZATION,
REGIONAL/BILATERAL/MULTILATERAL TRADING ARRANGEMENTS,
GLOBAL & REGIONAL PRODUCTION NETWORKS
Vision, Goals, Strategies• Vision: create globally competitive industries with strong
forward and backward linkages
• Short-run
o Strengthen existing industries, maintain
competitiveness of comparative advantage industries,
support emerging sectors
• Medium-run
o Increase investments especially in upstream industries,
high value added activities
o Accelerate infrastructure investment
• Long Run
o Continue improving competitiveness to sustain growth
& job creation & make Philippines a regional hub
• Strategies: HRD & Skills Training, SME Development,
Innovation, Green Growth, Investment Promotion,
Regulatory System (horizontal issues)
Major Strategies
Structural Change
Horizontal measures
Coordination mechanism
Vertical measures
• Close supply chain
gaps
• Expand domestic
market & exports
• HRD & skills trainings
• 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
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-Participate as 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; Link & integrate industries, SMEs & large firms, Innovation ecosystem; R&D
Phase I
2014-2017
Phase II
2018-2021
Phase III
2022-2025
VISION: globally competitive manufacturing strongly linked
with other sectors, more & better jobs, a main growth driver
AGRIBUSINESS: CATALYST TO DRIVE
REGIONAL ECONOMIC TRANSFORMATION
VISION: transform & upgrade agriculture from traditional farming to
a globally competitive agribusiness sector
-rubber, coconut, mangoes, coffee, cacao, banana, palm oil; emerging high value crops; supply chain gaps & coordination issues; rural physical infrastructure; S&T infrastructure, HRD
-deepen participation in GVC -PH as agribusiness regional hub
-strengthen agro-processing & its linkages to production; move up the GVC; R&D; strengthen supply chains, upgrade commodity clusters; 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 like tourism, construction, ship repair, MRO-accelerate infrastructure investments -move up ITBPM GVC
-PH as regional hub: training -continue to upgrade services especially in manufacturing related services to sustain growth & job creation
-education, design, R&D, finance, infrastructure-engineering & services embedded in manufacturing-HRD & skills training, innovation ecosystem linked with manufacturing
Phase I 2014-
2017
Phase II
2018-2021
Phase III
2022-2025
Vision: globally competitive services, create quality jobs,
move up the value chain, enable structural transformation
Strategic Actions
Sector Action
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
① Close Supply/Value Chain Gaps
Complex product, 30,000+ parts & components, different
production processes: large multiplier effect
Auto investments: foundation for broad-based industrial growth
CARS Program: jumpstart industry development to enable PH to
deepen its 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
② Expand domestic market export platform
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
③ HRD & Skills Trainings
Cooperation with TESDA, CHED
Investment in skills & education
④Other Strategic Actions
STRATEGIC ACTIONS
• SME Development: Finance access, compliance
with product standards, Clusters, Incubation, Shared
Services Facilities (Quality testing facilities, Fablabs)
• Innovation: Industry-academe linkages, R&D,
adoption of green processes, green products,
technology extension services esp. to SMEs; metrology,
standards testing, quality control; incubation; information
& communication
• Marketing & promotion: attract investments
• Horizontal issues: high cost of power &
domestic shipping, smuggling & streamline &
automate government procedures
Part 3: Implementation Mechanism
Industry Development Council mechanism for discussion of industry strategies,
policies & programs coordination, monitoring of roadmap implementation
Technical Working Groups champions from BOI & industry, relevant
government agencies
Manufacturing Resurgence Program: enhance manufacturing competitiveness; budget P182.6B Lead Implementing Agency: DTI
Participating Agencies: DOST, DOLE, DOLE-TESDA, CHED, DOE, DA, NPC, NEA, PCA
Industry Development
Council (IDC) IDC Secretariat
IDC Technical Committee
DTI - Chairman• DTI, NEDA, DA, DOF, OP; Private sectors representatives
IDC Executive Committee
DTI – Chairman• 11 representatives from government
• 7 representatives from private sector
• 1 representative of academe
• 1 representative of research institute/think tank
• 1 representative of labor
• 1 CSO representative
Ch
em
ica
ls,
pla
stic
s,
pe
troc
he
mic
al
Eminent Persons
Group (EPG)
5 industry
leaders
Philippine Industry Development Council
Ele
ctro
nic
s
Ma
ss
ho
us
ing
IT-B
PM
Fu
rnitu
re
Ce
ram
ic tile
s
Bio
die
se
l
Ae
ros
pa
ce
Au
tom
otiv
e
Co
pp
er
Me
tal
castin
g,
Ru
bb
er
Iron
& s
tee
l
Mo
torc
ycle
Na
tura
l
he
alth
Re
tirem
en
t
To
ol &
die
Pa
pe
r
Growth Performance
PH growth rate: 6.8 (‘12), 7.2% (’13, 2nd to China 7.7%), 6.1% (‘14)
Impressive growth performance of the Philippines: Asia’s new economic tiger
2015 Forecasts- Government: 7-8%, IMF: 6.7%, ADB: 6.4%, OECD: 6.2% (to lead growth in ASEAN), JPMorgan: 6.4%, Fitch Ratings: 6.3%
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
GDP Growth
PH TH INO VN PRC MAL
Manufacturing Resurgence
Industry growth: 7.3% (‘12); 9.3% (’13, highest)
Manufacturing resurgence: 5.4% (‘12); 10.3% (‘13);
8.1% (‘14)
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
in %
Year
Industry Growth
PH
TH
INO
VN
PRC
The Future of Philippine Industries
The Future of Philippine Industries
Thank You
visit us at www.industry.gov.ph
