INDUSTRY ROADMAPS & THE AEC GAME PLAN REGIONAL ROADMAPS FOR COMPETITIVENESS The Philippine New Industrial Policy for More Competitive Regional Economies Rafaelita M. Aldaba Assistant Secretary Industry Development & Trade Policy Group Legend Hotel, Puerto Princesa Palawan, 15 October 2015 1
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INDUSTRY ROADMAPS & THE AEC GAME PLAN
REGIONAL ROADMAPS FOR COMPETITIVENESS
The Philippine New Industrial
Policy for More Competitive
Regional Economies
Rafaelita M. AldabaAssistant Secretary
Industry Development & Trade Policy Group
Legend Hotel, Puerto Princesa
Palawan, 15 October 2015
1
Outline of Presentation
1. Strategic Industrial Policy for the Philippines
• Opportunities & Challenges
• Manufacturing Industry Roadmap
• Comprehensive National Industry Strategy
2. New Industrial Policy’s cluster-based approach• Porter’s Diamond Model for Competitive
Advantage
3. Implications for MIMAROPA
• Industry Cluster Roadmaps: sustainable & inclusive regional growth
2
Part 1: Opportunities & ChallengesShort-term Outlook
-move to high tech transport equipment, chemicals, electrical machinery-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
Phase I 2014-2017
Phase II 2018-2021
Phase III 2022-2025
VISION: globally competitive & strongly linked with other
sectors, a main growth driver
9
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
• Expand domestic market & exports
• HRD & skills• SME development• Innovation & green
growth
• Promotion• Power, smuggling,
logistics, infrastructure
• Improve regulation, reduce cost of doing business
up the value chain, enable structural transformation
12
Comprehensive National Industrial
Strategy (CNIS)
• Globally competitive industries, strong domestic & global linkages
• 3 Major Channels: COMPETITION, INNOVATION, PRODUCTIVITY
• Cluster-based industrial strategy to build strong & competitive
regional economies
MANUFACTURING SERVICES
AGRICULTURE FISHING,
FORESTRYMINING
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
13
Part 2: What makes a cluster competitive?
Porter’s Framework for Competitive Advantage
Context for Firm Strategy and Rivalry
Demand Conditions
Related and Supporting Industries
Factor (Input)
Conditions
1. Investment & constant upgrading
2. Competition among local firms
Adapted from: Porter, M. E. (2000).
- Natural, human and capital resources
- Physical, administrative, information, scientific and technological infrastructure
• Local customers with high
product & quality
specifications
• Production that meets
needs of existing & new
customers
• Production in specialized
segments that can be
exported
• Natural, human &
capital resources
• Physical,
administrative,
information, scientific
& technological
infrastructure
Drives FIRM PRODUCTIVITY, COMPETITION and INNOVATION
• Firms in a
cluster are
mutually
competitive &
cooperative
14
Agribusiness Cluster
Seeds Nurseries
Fertilizer, insecticides, herbicides
Farm Equipment
Storage Facilities
Irrigation Technology
Clusters of Other Agricultural Products
Clusters of Buyer/Consumer
Industries
State Government & Donor Agencies
Educational, Research & Trade Operations
Growers
Crop processing equipment
Processors
Transportation
Packaging Services
Public Relations Advertising
Specialized Publication
Financial Services
Source: World Bank Group. (2009)
• producers, agribusinesses, & institutions
• interconnect & build value networks when addressing common
challenges & pursuing common opportunities 15
Collective action: cornerstone of
agribusiness cluster competitiveness
• Resolution of coordination problems: logistics, inputs supply (packaging materials), access to financial services, pests & diseases
• Public cluster in infrastructure & research ( R& D for new product development, testing centers, nutrient analysis facilities, post harvest processing machines)
• Business intelligence services, collective marketing & promotion, market research & development of a product country brand, training programs
• Collaborative technology research & technology transfer
• Collective compliance with quality, safety, environmental standards
16
Part 3: Transforming Region IX
• Region IVB: 5% manufacturing share, 10% average growth rate • How to improve agricultural productivity & sustain manufacturing growth ?
• Vision: destination of investments, livelihood, residence, employment, adventure, rest and recreation, retirement (RDP Region IV-B 2011-2016)
• Industry Strategy: investments, exports, jobs, SME
• Horizontal Measures: infrastructure & logistics support, incentives, marketing, financing, R&D, other government support to strengthen industry clusters
OCCIDENTAL MINDORO grains by product such as rice hull for cooking fuel, insulating materials, fiberboard, building blocks; blast freezing of prawns, crabs
PALAWAN fruit processing (fruit purees and juices, candies for mango, candies, pastilles for cashew); seaweed processing & aquamarine processing of tuna, grouper & tiger prawn
ROMBLON coconut processing into coconut oil & coco-engine oil
ORIENTAL MINDORO fruit processing: calamansi, rambutan, mangoes; banana
• Food Security: new food production technologies; research in
agriculture & fisheries
• Strengthen link between job skills standards & TVET
curriculum
• Standardize & harmonize business procedures
• MSMEs: expand access to credit, product development
• Develop enterprise/industrial zones
• Industry cluster programs to strengthen linkages
Steps in Industry Roadmap
formulationSTEP 1: What are the existing & future growth
potentials of the industry in both domestic and export
markets?
• Benchmarking: fast growing countries with similar
endowment structure & industries that have grown well
STEP 2: See if private sector is already in these
industries; are there existing or nascent activities? if
none, seek FDI
STEP 3:What are the obstacles preventing the firms
from upgrading the quality of their products? new
firms from coming in?
• Value/Supply Chain analysis
• Growth Diagnostics by Hausman, Rodrik & Velasco (2005)
• Dialogues & consultations with private sector 22
Steps in Roadmap formulation (cont’d)
STEP 4:Take action to remove constraints: latch on to regional production networks, increase capacity to export; link domestic firms especially SMEs to multinationals
oHorizontal interventions: protection of property rights, improvement of overall business & investment environment, R&D, industrial clusters, economic zones
oVertical interventions: incentive measures to address market failure like tax incentives for a limited time, direct credits, access to raw materials & capital equipment
oCoordination mechanisms: industry councils to serve as venues for deliberation and coordination between the government & private sector
Cluster-based industrial strategy to build strong & competitive regional economies
Collective action foundation of cluster competitiveness
• For the private sector1. Ownership of the regional industry cluster
roadmaps
proximate source of growth: private sector, investment, & entrepreneurship
2. Leadership in developing the industry cluster
Sustainability in implementing programs
3. Active participation of business associations in Regional Industry Cluster Team Meetings
4. Collaboration with educational institutions
24
Recommendations
• For government: pro-active facilitator & coordinator
1. Remove binding constraints to competitiveness Physical infrastructure: roads, seaports and airports,
power, shipping, logistics
Administrative infrastructure: trade facilitation, business permits, tax administration
Scientific and Technological infrastructure: link with academe, innovation, research & development, shared services facilities, post harvest processing facilities, pests & diseases
Addressing supply/value chain gaps
Human resource development & skills trainings
2. Mix of incentives for farmers/growers & processors
3. SMEs’ inclusion in industry clusters: access to finance, technology, skilled workers, compliance with product standards & quality, production facilities
4. Cluster upgrading & moving up the value chain 25