Reviving the manufacturing industry

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Thelma Dumpit-Murillo

Thelma Dumpit-Murillo

TIDS updates
In 2012, the Trade Department and Board of Investments launched its Industry Development Program to revive the manufacturing industry and support the growth of the service sector.

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The government called on the private sector to come up with their respective roadmaps for the short, medium, and long-term growth of their industries. To date, 20 sectoral roadmaps have been submitted to the BOI from the auto parts, bio-diesel, cement, ceramic tiles, chemicals, copper and copper products, electric vehicles, furniture, IT-BPM, iron and steel, mass housing, metal casting, motorcycles, motocycle parts, motor vehicles or automotive, paper, petrochemicals, plastics, rubber products, and tool and die.

Six sectors are still crafting their roadmaps (shipbuilding, medical travel, mineral processing, bamboo, creative industries, and aerospace) while the electronics roadmap is still being updated.

All of these will be integrated into the Philippine Manufacturing Industry Roadmap by the Philippine Institute for Development Studies which is also tasked to come up with the Comprehensive National Industrial Strategy (CNIS). At the onset, PIDS presented the proposed framework for the formulation of the roadmap to the various business associations, labor and civil society organizations, academe, and other government agencies. They conducted brownbag sessions to gather more information from industry and government stakeholders.

These roadmaps are meant to enhance the competitiveness of Philippine industries and to help government identify critical supply chain gaps that will move industries up the value chain and hopefully allow deeper participation in the global supply chain. For example, the copper and copper products roadmap is quite advanced and already at the project feasibility stage for a copper wire rod manufacturing facility to plug the gap in the copper supply chain and to establish an integrated copper industry.

The chemical industry on the other hand has ongoing initiatives to improve quality and environmental standards enforcement and to develop skills and competencies in chemical manufacturing.

A roadmap is just a plan or set of guidelines but like any other, success is in the implementation. Thus, technical working groups were organized for each sector composed of champions from the industry and the BOI and other relevant DTI units and government agencies. They will be responsible in drawing up the sectoral plans of action and seeing to it that the goals and targets of the roadmaps are achieved within the identified timelines.

According to a report of the Asian Development Bank, the manufacturing sector remains a critical factor for Asian countries like the Philippines to prosper and avoid the middle income trap.

In its chapter on Key Indicators for Asia and the Pacific 2013, the ADB’s flagship annual statistical publication, the ADB noted that a progressive manufacturing sector was key to highly productive service sector, technological innovation and in modernizing agriculture in Asian countries.

The ADB’s chief economist Changyong Rhee said no economy has reached high-income status without reaching at least 18 percent share of manufacturing in output and employment for a sustained period.

The Philippines has relied on the services sector to grow the economy but Rhee says it is a “serious mistake” if a country wants to be prosperous. The Philippines is not alone though as the report noted that other developing Asian nations like Bangladesh, India, and Pakistan are shifting from agriculture to services. The report noted that several economies rapidly industrialized to become high-income countries. These included Hong Kong, China; Japan; Republic of Korea; Singapore and Taipei.

The Philippines, which has had less success at building a manufacturing sector, will specifically need to develop a much deeper industrial base to complement its service sector to avoid being caught in the middle-income trap, the ADB said.

According to the report, several factors affected attempts of the Philippines to industrialize in the 1980s. These are internal and external crises which almost decimated the Philippines’ shallow industrial base. Also, the country failed to diversify its exports and depended more on imports. It also cited the flawed incentive structures and lack of nationalism among the “captains” of industries which we continue to see today.

The Aquino administration has two and a half years to make a go of these beautiful roadmaps to revive manufacturing and make the economic growth more sustainable beyond its term. Otherwise, we just wasted taxpayers money again.

God is Great!
thelmadm@yahoo.com

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2 Comments

  1. Only the manufacturing industry can revive the dwindling Philippine economy. Let us face it, the service industry is now in a plateau and it is apparent that this kind of industry will not last considering that there are other countries now who are into services with lower costs. Manufacturing have to be it but the country must face realities that it will be wishful thinking to achieve this goal if the country will continue to protect our mineral and other resources and limit foreign ownership of foreign investors.