PH COMPREHENSIVE NATIONAL INDUSTRIAL...
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The Future of Philippine Industries
PH COMPREHENSIVE
NATIONAL INDUSTRIAL
STRATEGY
Rafaelita M. Aldaba
Industry Development Group
30 June 2015
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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
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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
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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
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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
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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%
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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%
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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
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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)
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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
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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
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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
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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
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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
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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
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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
③ HRD & Skills Trainings
Cooperation with TESDA, CHED
Investment in skills & education
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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
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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
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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
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ls,
pla
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pe
troc
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mic
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Eminent Persons
Group (EPG)
5 industry
leaders
Philippine Industry Development Council
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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
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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
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The Future of Philippine Industries
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The Future of Philippine Industries
Thank You
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