Cebu Chamber of Commerce and Industry Technology & Innovation Expo and Entrepreneurship Conference June 18-20, 2015 Marriott Hotel, Cebu City Industry.

Cebu Chamber of Commerce and Industry

Technology & Innovation Expo and Entrepreneurship Conference

June 18-20, 2015Marriott Hotel, Cebu City

Industry Development Program

Director Nestor P. ArcansalinDTI - Board of Investments

Five Pillars for Industry Development

1. Sustain growth in existing revenue – “big ones”• e-Services (IT-BPM)• Electronics (semicon)• Shipbuilding• Construction

2. Pursue SME Countryside Growth – “inclusive” • Agri-based (ex. bamboo,

coffee, acao, coconut, rubber, processed food)

4. Develop new revenue streams – “new BPOs”• Creative industries

(animation, software, gaming, game development)

• Medical space (clinical support services)

5. Revisit the backbone sectors• Iron and steel• Petrochemicals• Copper downstream• Chemicals

3. Recover/Recapture Sectors• Motor vehicles/auto parts• Apparel• Footwear• Travel goods• Consumer electronics

Industry Development Program

• Industry Development Roadmap• Comprehensive National Industry Strategy

(CNIS)⁻ Manufacturing Industry Roadmap⁻ Agriculture Industry Roadmap⁻ Services Industry Roadmap

• Manufacturing Resurgence Program (MRP)

Program Implementation

Craft industry development roadmaps

Craft a comprehensive national industrial strategy

Institutionalize public-private sector partnership in executing the roadmaps

Build up capacity of government and industry associations to execute the roadmaps

Develop a more strategic and focused investment promotions plan

Program Implementation

• Crafting of the

Roadmaps

Phase One

• Consolidation and

Integration

Phase Two• Execution of

the Roadmaps

Phase Three

• Monitoring and

Evaluation

Phase Four

INDUSTRY DEVELOPMENT ROADMAP

Roadmapping Project

• Private-sector led, Government as enabler• Are about building and enhancing

competitiveness of Philippine industries• Advocacy and roll-out• Implementing the roadmap action plans,

projects and programs

Rationale

Why need to formulate industry development roadmaps:

1. industry baselines (state of the industry)2. industry potentials (SWOT; goals & targets)3. industry’s markets (local and foreign)4. strategies (plans, programs, projects)5. Focused promotional activities6. policy coherence

Outline of Roadmap - ElementsExecutive SummaryChapter 1. Introduction

- Perspective on the RoadmapChapter 2. State of the Industry

- Structure- Performance/Benefits of the Industry- Supply and Demand- Challenges / Concerns

Chapter 3. SWOT Analysis- Strengths, weaknesses, opportunities and threats

Chapter 4. Vision, Goals and Targets - Milestone(s) within the short (by 2016), medium (by 2022) and long-term (by 2030)

Chapter 5. Strategies and Timeline- Plan of actions to achieve the vision within the specific timeframe

Chapter 6. Support to Industry Development- General support- Specific industry programs

Chapter 7. Recommendations- As to policies, prioritization of strategies, activities and implementation of the strategies

Completed Roadmaps (As of June 2015)

1 Automotives

2 Automotive Parts

3 Biodesel

4 Cement

5 Ceramic Tiles

6 Chemicals

7 Copper and Copper Products

8 Furniture

9 Mass Housing

10 Motorcycle

11 Petrochemical

12 Rubber Products

13 Tool and Die

14 Manufacturing

15 Electric Vehicles

16 Electronics

17 Iron and Steel

18 IT-BPM

19 Metalcasting

20 Plastics

21 Paper

22 Natural Health Products

23 Aerospace

24 Retirement

25 Shipbuilding

26 IC Design

27 Health Care Services

28 Printing

29 Book Publishing

Roadmaps for Completion (As of June 2015)

Drafted1 Coco Coir2 Bamboo3 Creative industries4 Jewelry5 Gold

5 Condiments/Mixes6 Footwear7 Garments8 Textiles

9 Mineral Processing (Ni, Cr, Mn)

10 Processed Fishery Products

11 Processed Meat

12 Processed Fruits

13 Processed Shrimp/ Prawns

14 Seaweeds/ Carrageenan

15 Services

16 Agro-industrial

Under Development1 Appliance2 Christmas Décor

3 Gifts and Housewares

4 Chocolate Confectionaries

COMPREHENSIVE NATIONAL INDUSTRIAL STRATEGY

Motivations

Why promote industrial policy?

1. Inclusive growth, creation of more & better jobs• Jobless growth• Stagnant manufacturing & failure to create jobs• Services cannot provide all the needed jobs• Persistently high inequality

2. Globalization, rising regional economic integration, global value chains (GVCs)

Manufacturing Roadmap for Structural Transformation

-Rebuild existing capacity (auto),

- strengthen emerging industries (aerospace parts)

- maintain competitiveness of comparative advantage industries (electronics, garments, auto parts, food, resource-based)

-move to high tech transport equipment, chemicals, electrical machinery-manufacturing -related services-Participate as manufacturing hubs in regional & global production networks for auto, electronics, machinery, garments, food

-Shift to high value added activities,- investments in upstream industries (chemicals, iron & steel, basic & fabricated metal) - move up value chain (food, auto, garments, electronics)- Link & integrate industries, SMEs & large firms- Innovation, R&D

Phase I 2014-2017

Phase II 2018-2021

Phase III 2022-2025

Vision: globally competitive industries with strong forward & backward linkages

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Agriculture Roadmap

Services Roadmap

INSTITUTIONAL MECHANISM

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Institutional Mechanism

Industry Development Council

Manufacturing Resurgence

Program Cluster

Sectoral Working Group

- BOI Champion- Industry Champion

- Reps from Other Govt. Agencies

Sectoral Working Group

- BOI Champion- Industry Champion

- Reps from Other Govt. Agencies

Sectoral Working Group

- BOI Champion- Industry Champion

- Reps from Other Govt. Agencies

Strategy Unit / Secretariat

Executive Committee

Eminent Persons Group

Cabinet Assistance System

Sectoral Work – Implementing the Roadmap

1. Completing information gaps2. Shepherding inter-agency work

a. Policies/Reforms (taxation, administrative regulations, smuggling, logistics, permits & licenses, law implementation)

b. R&Dc. HR (skills, college degrees, PhDs/Master degrees)d. Products/Subsectors (for development - supply

chain gaps and promotion)3. Implementation and monitoring of projects/programs4. Evaluating/Assessing the projects/programs5. Reporting to the IDC

Intermediate

INDUSTRY DEVELOPMENT PROGRAMRoadmaps: Stages of Implementation

Advanced

Beginning

• CEMENT• ELECTRIC VEHICLES• IRON AND STEEL• NATURAL HEALTH PRODUCTS• METALCASTING• MOTORCYCLES• PAPER PRODUCTS• RETIREMENT• SHIPBUILDING

• AEROSPACE• BIODIESEL• CERAMIC TILES

•AUTOMOTIVE & AUTO PARTS• CHEMICAL CLUSTER (CHEMICALS, PETROCHEMICALS & PLASTICS)• COPPER & COPPER PRODUCTS• ELECTRONICS • FURNITURE• IT-BPM• MANUFACTURING • MASS HOUSING• RUBBER• TOOL AND DIE

Among the Program’s Major Accomplishments:•Ease of Doing Business – New DENR DAO on Exemption of Certain Chemical Mixtures from the Priority Chemical List (PCL); Finalized product standards on semi-gloss latex topcoat paints; Reverse Trade Arrangement Between Boysen Paints and the Subdivision and Housing Developers Association (SHDA);

•HRD/Capacity Building – Holding of 5th IC Design Training with Taiwanese Professors in UP; MOA between PRIA and Mapua for the first Rubber course in the Philippines; Training by MIRDC on Die & Mould-Making and Design using CAD/CAM; Completed training regulations for plant process operators and QA/QC laboratory technicians;

•Support Facilities – Establishment of the Advanced Device and Materials Testing Laboratory (ADMATEL), Electronics Product Development Center (EPDC), Philippine Institute for IC Design (PIIC), Tool and Die Solution Center, Automotive Parts Testing Center, Shared Service Facilities (e.g. testing laboratories for rubber, wood working equipment for furniture);

•Research/Study – Completion of Pre-Feasibility Study on Copper Wire Rod, Brief Market Study on Copper Enameling Plant, IC Design Roadmap, Shipbuilding Roadmap and Rapid Industry Assessments on Condiments, Confectioneries/Chocolate, Shrimps/Prawns, Mango and Carrageenan; Enhancements of 3 roadmaps;

•Special Projects - Comprehensive Automotive Resurgence Strategy (CARS) Program; Pilot Geo-mapping of Industries (Automotive and Tool & Die); Conceptualization of the Green Domestic Manufacturing Zone in Leyte;

•Promotions, Advocacy and IEC - Promo collaterals to strengthen PH brand; 7 TID Updates; 3 Regional Conferences/Localization of Roadmaps.

MANUFACTURING RESURGENCE PROGRAM

Policy Lessons• Inclusiveness requires the following to create more jobs:

– high & sustained growth• Improve productivity in agriculture where half of the poor are

– programs for poverty reduction & social protection• Increase skills of the poor thru greater access to higher levels of education

– pro-active growth policies & industrial strategies• Structural change through the development of manufacturing is essential

to any developing country for job creation, poverty reduction & sustained development (Justin Lin, 2013) – Services cannot provide all the needed jobs– Promote growth in manufacturing where labor-intensive & new &

high productivity jobs can be created: low, medium, high-skilled workers

Share of Manufacturing to GDP

• Manufacturing share rose from ‘50s to 70s; declined from the 1980s to the 2000s; Services increased from ‘70s to 20s

• Fabella (2012): development progeria or premature aging, rise in services, fall in industry, decline in manufacturing

• Decline - a reflection of failure of long-term manufacturing strategy

1950s

1960s 1970s 1980s 1990s 2000s 2012 S1 2013

Agri,Fishery,Forestry 32.5 29.7 25.6 23.9 20.8 18.9 11.07 10.23

Agriculture 32.5 26.5 20.7 22.1 20.5 18.8

Industry Sector 30.6 32.6 38.3 38.0 34.1 33.0 32.05 32.96

Mining & Quarrying 1.2 1.1 1.4 1.7 1.3 1.7 1.14 1.33

Manufacturing 22.3 25.6 28.2 26.3 24.3 23.7 22.11 22.57

Construction 6.1 5.0 7.1 7.3 5.5 4.5 5.39 5.74

Electricity, Gas & Water 1.1 1.0 1.7 2.7 3.0 3.2 3.41 3.31

Service Sector 38.3 38.4 36.6 40.4 42.4 48.0 56.88 56.81

BACK

Manufacturing Resurgence Program

• Identified priority program of the present Administration under National Budget Memorandum (NBM) No. 118

• Consists of projects and sub-programs that will enhance the competitiveness of the Manufacturing Industry

• Its main reference/blueprint is the Manufacturing Industry Roadmap

Manufacturing Resurgence Program

• Budget Allocation2014: P182.6B2015: P238B (proposed)

• Lead Implementing Agency: DTI• Participating Agencies: DOST, DOLE, DOLE-

TESDA, CHED, DOE, DA, NPC, NEA, PCA

Key Outcomes

• 3 ppt annual increase in value added• 0.5 ppt annual increase in share of

manufacturing to GDP• 300-500 thousand jobs per year

Strategy to make manufacturing an engine of growth & source of more & better Jobs

30% value added; 15% employment

Horizontal measures

Coordination mechanism

Vertical measures

• Close supply chain gaps: copper, paper, iron & steel, furniture, tool & die

• Expand domestic market & exports: auto, shipbuilding

• HRD & skills training• 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 28

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Industrial Policy: ElementsCross-cutting interventions Critical role of roadmaps in focusing existing government programs

Secured commitment of lead agencies:a. Infrastructure (DPWH)b. Power and energy (DOE) c. Research & Development (DOST)d. Human resource development (DTI as lead; DepEd, CHED, DOLE, TESDA)e. Local Government regulations (DILG, NCC)

DTI as lead:f. International marketing & promotions (BOI, PEZA, other IPAs, CITEM,

BETP, among others) g. Logistics (DTI as lead for amendment of cabotage-related laws &

regulations)

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Industrial Policy: Elements Industry-specific policy tools

• Tariffs – General review of Executive Order 61 (issued Oct 2011)• Market access negotiations – Incorporation into the Trade

Negotiation Agenda for FTAs and Preferential Access• Incentives – Investment Priorities Plan of 2014-2015

• Technical Standards – Development of standards across products and services; mandatory implementation of existing standards

• Trade Remedies / Trade Defense

• Demand-side stimulation• Public investment in

common facilities

Manufacturing: Strategic Actions

Actions

• Institutional mechanism to fully integrate the industry

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

• Supply hubs for raw & natural materials, equipment and software

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

① Close Supply/Value Chain Gaps

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

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

②Expand domestic marketexport 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• Labor policies to facilitate movement from low productivity to high

productivity jobs33

④Other Strategic ActionsSTRATEGIC 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: power, shipping, smuggling, doing business procedures

THANK YOU!

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Basic Principles

1. Primacy of good governance 2. Transparent, Inclusive and Participative 3. Private sector-driven 4. Government as convenor, coordinator,

facilitator, enabler5. Pragmatic rather than grand design

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Elements of Industrial Strategy (1/3)

1. Institutional mechanisma. Industry Development Council (IDC) b. Manufacturing Revival Program for 2014-2016c. Key policy documents

• Philippine Development Plan (Ch.3)• Investment Priorities Plan (IPP) 2014-2015• Trade Negotiation Agenda• Philippine Export Development Plan (PEDP) 2014-2016• Philippine Investment Promotion Plan• TCTRM Workplan 2014-2016

2. Macroeconomic advocacystability in foreign exchange rate, interest rates and general price level

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Elements of Industrial Strategy(2/3)

3. Cross-cutting interventions Critical role of roadmaps in focusing existing government programs

Secured commitment of lead agencies:a. Infrastructure (DPWH)b. Power and Energy (DOE) c. Research & Development (DOST)d. Human resource development (DTI as lead; DepEd, CHED, DOLE,

TESDA)e. Local Government Regulations (DILG, NCC)

DTI as lead:f. International Marketing & Promotions (BOI, PEZA, other IPAs, CITEM,

BETP, among others) g. Logistics (DTI as lead for amendment of cabotage-related laws &

regulations)

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Elements of Industrial Strategy(3/3)

4. Industry-specific policy tools• Tariffs – General review of Executive Order 61 (issued Oct 2011)• Market access negotiations – Incorporation into the Trade

Negotiation Agenda for FTAs and Preferential Access• Incentives – Investment Priorities Plan of 2014-2015

• Technical Standards – Development of standards across products and services; mandatory implementation of existing standards

• Trade Remedies / Trade Defense

• Demand-side stimulation• Public investment in

common facilities

V. Projects and Programs- As submitted by participating agencies in the MRP i.e., DTI

(BOI and RODG), DOST, DOLE, PCA-DA, TESDA and DOE

Projects and Programsa. Institutional & Operational Support

→ Industry Development Program (DTI-BOI)↘ Operationalization of the Industry Development Council ↘ Publication/Printing of Roadmaps/CNIS and Related Materials ↘ Conduct of Feasibility Studies↘ Resolution of Horizontal and Vertical Issues

→ Strengthening of Testing and Analytical Capabilities of Regional Laboratories (DOST)→ Technology Needs Assessment in Biotechnology (DOST)→ Rebuilding of Testing Capability on Energy Efficiency Testing and Expansion of the Coverage of the

Energy Efficiency Standards and Labeling (EES&L) Program for Air Conditioners (DOE)→ Technical Capability on Quality Testing of LPG Autogas (DOE)→ Rural Electrification Program (90% household electrification by 2017)→ Household Electrification in Off-Grid Areas using RE (DOE)→ Oil Industry Deregulation Management Program (DOE)→ Government Energy Management Program (DOE)→ Alternative Fuels for Transport – natural gas, e-vehicles, etc. (DOE)→ Market Transformation through the Introduction of e-Trike Program (DOE)→ One-Stop On-line Processing and Reporting System for Energy Contracts (OSOPRSEC)

Projects and Programsb. Research & Development

→ Food – fermented foods, cacao & cocoa products, food additives, healthy & convenient food products, intermediate food products and ingredients, food safety

→ Agro-industrial – rubber and rubber products, abaca, recombinant production, essential oils

→ Electronics – ADMATEL, product development hub→ Metals and Engineering – value-adding technologies→ Mining and Minerals - value-adding technologies, responsible mining→ Energy – FS on low-enthalpy geothermal resource, ocean energy

potential resource assessment, wind resource assessment, assessment of selected low-enthalpy geothermal areas, techno-economic and viability study for other biofuel feedstock,

Projects and Programsc. Enterprise Development

→ Agro-industrial Hub (PCA)→ KEDP-Community/Household-level Coconut

Processing (PCA)→ Establishment of Technology/Business Incubation

Centers (DTI & DOST)→ The Big Push for MSME Development (DTI-RODG)

↘ Shared Service Facility (SSF)↘ OTOP-TP Stores↘ Micro Enterprise Development Program↘ Industry Cluster Development

Projects and Programsd. Manpower Development and Retention

→Labor Code Amendment (DOLE)→Labor Law Compliance and Incentivizing System (DOLE)→Productivity Improvement→Single Entity Approach (DOLE)→Training Contract Scheme (TCS) for SMEs (TESDA)→Bridging Competency Gap Phase 2 (DOST)→Philippine Institute of Integrated Circuits (DOST)→SME Roving Academy (DTI-RODG)→Capacity-building Activities (DTI-BOI)