YEARENDER: Phl needs to strengthen mfg sector for inclusive growth

MANILA, Philippines – The Philippines may now be an attractive destination for investors to set up production facilities due to its positive economic performance, but it still needs to do more to strengthen the manufacturing sector to create more jobs and achieve inclusive growth.

Even as the National Statistical Coordination Board (NSCB) reported that the economy posted a higher 7.4-percent growth in the January to September period compared to the 6.7-percent expansion seen in the same period last year, achieving inclusive growth through the creation of more jobs remains a challenge.

To achieve inclusive economic growth, Philippine Chamber of Commerce and Industry (PCCI) president Miguel Varela said the government needs to step-up efforts to boost the manufacturing sector which is seen to generate employment.

“The government has to strengthen the manufacturing (sector) to address disparity in employment. With manufacturing sector as a growth driver, we are hopeful more jobs will be generated,” he said. In line with promoting the growth of specific industries and theentire manufacturing sector, the Department of Trade and Industry (DTI) launched the industry roadmaps project in January last year.

Under the initiative, industry groups have committed to craft road maps that would contain among others, their group’s goals, strategies for short, medium and long term growth as well as required interventions from the government.

Trade undersecretary Adrian Cristobal, Jr. said that to date, 23 industry groups have already submitted their roadmaps to the DTI, and nine of which been presented to the public such as those for thechemical, copper and copper products, rubber, paper, mass housing, iron and steel, cement, information technology and business process management, and electronics sectors.

He added that least 10 more industry associations have expressed interest to come up with their respective roadmaps.

To implement the road maps, Cristobal said technical working groups composed of officials from the industry, the DTI and other relevant government agencies, have also been organized for each sector.

The road maps would serve as building blocks of the manufacturing industry or the main reference or blueprint for the country’s manufacturing revival program being prepared by the government.

The road maps would also be used to craft the Comprehensive National Industrial Strategy (CNIS) which would be the blueprint for the overall industrial development strategy covering agriculture, industry and services in the country.

Aside from the industry road map initiative, the government is also actively encouraging companies to make investments in the manufacturing sector.

“We really want to grow further the manufacturing sector.

Manufacturing has been showing impressive growth rates for the past quarters…so we want to help boost that some more to generate jobs,” Cristobal said.

The manufacturing sector has exhibited growth rates higher than nine percent since the first quarter of 2013.

As the government works to revive the manufacturing sector, foreign and local business groups are proposing a two-pronged approach to revive low-cost labor intensivesectors such as food and beverages; garments; and furniture and toys, as well as expanding high value-added manufacturing which cover semiconductors; transporation equipment, and chemicals.

In the policy brief titled Manufacturing: Creating Millions of Better Jobs released earlier this month, among the core strategies being pushed to grow the manufacturing sector is the creation of Domestic or Export Enterprise Zones (D/EEZs) in non-industrialized areas with abundant low-cost labor.

The policy brief was created based on roundtable discussions organized by the Joint Foreign Chambers (JFC) which drew recommendations from other business groups as well as associations.

The groups which provided inputs to the policy brief include AmCham, Australian-New Zealand Chamber of Commerce of the Philippines, Canadian Chamber of Commerce of the Philippines, Chamber of Furniture Industries of the Philippines, Confederation of Garment Exporters of the Philippines, European Chamber of Commerce of the Philippines, Employers Confederation of the Philippines, Foreign Buyers Association of the Philippines, Garment Business Association of the Philippines, Japanese Chamber of Commerce and Industry of the Philippines, Korean Chamber of Commerce Philippines, Management Association of the Philippines, Philippine Association of Paint Manufacturers, PCCI, Philippine Exporters Confederation, Philippine Oleochemical Manufacturers Association of the Philippines , Philippine Plastics Association, Semiconductors and Electronics Industries in the Philippines, Inc. and Samahan sa Pilipinas ng mga Industriyang Kimika.

The groups also recommend policies which would make locating in D/EEZs attractive and competitive for both domestic and foreign manufacturing investors.

“The menu of supportive and flexible policies needed include:low-rent standard factory buildings, low-cost long-term land leases, programs to increase labor productivity, relaxed policies on hiring and firing, targeted government training programs, special or low electricity rates and the like, in addition to existing PEZA (Philippine Economic Zone Authority) incentives,” the groups said.

In creating D/EEZs, local officials should agree not to interfere in such sites, the groups said.

By implementing the recommendations in the policy brief, the groups —- that the manufacturing sector could create more jobs and increase the sector’s contribution to the economy.

In particular, the groups said four million new jobs could be created in the manufacturing sector by 2022 which would involve generating an average of 500,000 new employment per year beginning 2015.

By creating 500,000 new jobs in the manufacturing sector per year,the share of the sector in the country’s gross domestic product should likewise increase from just 21 percent today to 25 percent by 2016 and 30 percent by 2022.

The groups now is the time to push for the revival of the manufacturing sector given the country’s trainable English-speaking workforce, increasing domestic demand, the PEZA’s success in creating economic zones an improved international image and strong economic growth.

Cristobal said that in coming up with the CNIS, the government would consider the proposal of the foreign and local business groups to create D/EEZs.

“Definitely this is one practical way of addressing high power costs and facilitating trade and bringing down costs of doing business as necessary infrastructure and streamlined procedures in dealing with various government agencies could be provided in ecozones,” he said.

He noted, however, that the proposal still needs to be studied carefully. While the government wants to help make domestic manufacturers in the D/EEZs competitive, he said it will also be ascertained that the development in the zones would benefit small and medium enterprises (SMEs) outside of it.

He said the government wants to be able to link SMEs with the domestic manufacturers located in the zones.

“We just have to study it carefully because the challenge is how to allow growth and development to the economy as a whole,” he said. –Louella d. Desiderio (The Philippine Star)