Japan’s Inputs towards the Formulation of Industry Vision of the Philippines Industrial Development Scenario for “No One Left Poor ” 29 November, 2017 Kunihiko Shinoda Deputy Director-General Ministry of Economy, Trade and Industry, Japan
Background “Philippine ambition: No more poor Filipinos by 2040,” “Philippine Development, Plan (PDP) 2017 –2022,” mentions "To become a middle - income country with poverty alleviated completely" as a goal until 2040. “Philippine ambition” has started promoting reform for enhancing the social structure and correcting unfair inequality as well as enhancement of economic growth potential in order to achieve the goals such as: establishing a clean and “Filipino first” government; realizing a society where even socially-handicapped and alienated people can actually feel the economic growth, and ensuring economic safety and stability by increasing the national welfare. 1
Global competition is becoming severer, especially after the full enforcement of AFTA in 2018. There are export pressures from China and India, while ASEAN member states have to identify their comparative advantages. Competition among Asian countries Influx of over produced goods Make in India = Promotion of manufacturing and export Full enforcement of AFTA in 2018 2
One of the advantages of the Philippines is a growing domestic market and population. GDP growth rates and estimates for Population dividend for major Asian countries major ASEAN countries 8.0% The Philippines 7.0% Viet Nam 6.0% Indonesia 5.0% Malaysia 4.0% 3.0% Thailand 2.0% 1.0% 0.0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Indonesia Malaysia The Philippines Thailand Viet Nam Source: IMF World Economic Outlook Source: UN Population Division 、 2015 estimation 3
The Philippines is ranked number 8 of potential business destination of Japanese manufacturing companies. Ranking of prospective investment destination Reasons of prospectivity of the Philippines as by Japanese manufacturing companies investment destination 0% 20% 40% 60% 80%100% Growth potential of the 77% local market Inexpensive labor 32% The size of the market as 23% of today Supply base to assemblers 21% Export base to other 19% countries Source: JBIC questionnaire survey data Source: JBIC questionnaire survey data 4
Role of Industrial Development Vision the Philippines has faced some challenging issues for creating the above- mentioned employment. Survival among countries due to ASEAN economic integration Insufficient domestic industry accumulation, outflow of highly skilled HR Oligopoly of industry, unfair business circumstances, governmental capacity This vision indicates a scenario of creating stable employment for “No One Left Poor” and the policy direction, and introduces successful cases in other countries, including Japan. 5
Scenario for Realization ： Pillar1 Pillar1 Creation of Large-scale Employment - Establishment of Domestic Industrial Base - <Step 1> Introduction • Necessity of competitiveness in both quality and cost for domestic production increase • Lack of capital, technology, human resources, know-how • Introduction of foreign capital / technology → Necessity of activating domestic demand <Step 2> Spillover to local industry • Invitation of foreign SMEs, supporting industries → Spill over of technology and management know-how to local companies → competitive local SMEs <Step 3> Participation in global value chain • Improvement of industrial infrastructure and creation of large-scale employment → Strengthening industrial competitiveness. Forming foundation of export industry 6
Direction of Policy & Proposal for Pillar1 Direction of Policy Proposal Formulation of industrialization strategy by Identification of Industry Groups to public-private partnership be Focused on and Strategy Formulation Developing supporting industry by benchmarking CARS program Introduction of Framework for Consolidation / transition support of existing Promoting Domestic Trade industries Introducin Developing Supporting Industries g foreign Creating Domestic PEZA and Industries for Domestic Demand capital for through Attracting Foreign Capital domestic Attracting foreign Supporting Industries demand Expansion of Support for Local Deregulation of foreign investment in retail Supporting SMEs Expanding financing for SMEs Ensuring Fair Competition Political leadership remediation campaign Further Activation of Domestic Demand Expanding retail financing Industry-Oriented Human Resource Development Expansion of vocational training schools Development of Infrastructure and Cross-Agency Interagency coordination through IDC Industrial Development System 7
For Example… Importance of supporting industry and attraction of foreign investments by companies with technology and cutting-edge processing equipment. Number of member companies of auto-parts industry associations 700 618 600 500 400 300 228 200 Source: NRI based on hearing 100 44 from each association 0 The Philippines Thailand Indonesia Support for local business development in human resource development and capital investment. Incentive scheme and improvement of ease of doing business for promoting investments aiming the domestic market. 8
Scenario for Realization ： Pillar2 Pillar2 Creation of High Value-Added Employment -Retaining Highly Skilled Industrial Workers within the Philippines- • Leak out of human resources with advanced knowledge, skills, ability to overseas • Creating high value-added / advanced industrial groups to secure HR, in addition to utilizing HR in foreign companies ＜ possible perspective ＞ • Utilization of industries already having strengths (IT industry etc.) → High value added by expanding business (design, etc.) and cooperating with other industries • Creation of new industries → Promotion of entrepreneurship such as start -up, Promotion of cross-sectoral integration projects, innovation, university incubation base, etc. 9
Direction of Policy & Proposal for Pillar2 Direction of Policy Proposal Integration of IT and electronics Business Expansion of industry by Embedded IT Existing Industry and Cooperation with Other Promoting start-up companies Industries Promoting FinTech Creation of high Formation of industry, government Creating New Industries added and academe consortium and Promotion of value/advanced Entrepreneurship for Making university incubation base industrial group Innovation Attracting highly skilled industrial human resources to return to the Promotion of Projects for country Creation of New Industries and Innovation Promotion of collaborating project 10
For Example… Full utilization of Filipino who are capable of English and IT. ASEAN regional engineer hub ASEAN regional ESO hub Promotion of innovation to increase start-ups and enhance hybrid sectors of IT and other sub-sectors. Start-ups at ASEAN-JAPAN Fair in Manila Ministers at ASEAN-JAPAN Fair 11
Scenario for Realization ： Pillar3 Creation of Employment through Local Industry Development – Pillar3 Agriculture, IT/BPO industry, etc.- • Focusing on specific industries by taking advantage of the characteristics of rural areas (Central Luzon, Calabarzon, Mindanao), → Providing incentives to enterprises in rural areas ＜ Potential Target area ＞ • Promoting agriculture, forestry and fishery industries using attractive products / upgrading logistics system • Promoting IT / BPO industry that can overcome geographical division • Ripple effect for tourism and retail 12
Direction of Policy & Proposal for Pillar3 Direction of Policy Proposal Regional brand certification system Increasing Added Value by Clustering and Creating derivative effects on tourism / retail Modernizing of Agriculture Promotion of Support for expanding business into food agriculture Upgrading Logistics processing industry Enabling Freshness Improving cold chain Maintenance Improving fishing ports / seaports Development of IT-BPO industry Attract IT-BPO industry to provincial areas Incentives for Company Location in Regional Areas Presentation of regional incentives Supporting Local Governments to Make Formulation of support for local Industrial Policies governments 13
For Example… Food value chain: Value chain linkage is weak between mega consumer market such as Manila NCR and other agricultural areas. Bridging agriculture and food processing sectors and establishing distribution channel and cold chain network. Vitalization of service industry including retails that will be stimulated by the development of above mentioned sectors and tourism. IT/BPM can conquer the geographical disruption, create a large employment and utilize the English ability of the Filipino. 14
For Example… Next Wave Cities of IT/BPM IT/BPM is widely spread throughout the Centres of Excellence country. Four out of six centers of excellence Laoag Top Ten Next Wave Cities Tuguegarao are located in Mindanao and Visayas. Baguio Emerging Cities Dagupan Tarlac Clark Taytay Malolos Sta Rosa Naga Manila Iriga Balanga Dasmarinas Legazpi Lipa Roxas Cebu Iloilo Puerto Princesa Bacolod Dumaguete Cagayan De Oro Zamboanga Davao 15 Source: NRI, based on National ICT Confederation of the Philippines
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